Betfair Trading - Why odds matter!
This won't be a long post, it doesn't need to be, this topic is a fundamental truth that is easily explained.
Whether you are a football trader, a horse racing trader, a cricket trader or a tennis trader this principle applies to everyone... ODDS MATTER!
Sorry if this sounds obvious but it is amazing how often I hear a comment like, 'The odds are a bit short but I think it will win so I am going to back it!' or 'I'm not bothered about the odds because I just have a gut feeling'.
If you have ever uttered these phrases or anything similar then this article will help you immeasurably as a trader, the reason being you cannot find good value without finding good odds, and without good value you will not make money in the long run.
Sure you may fluke a good streak at some point but the basic principles of mathematics will tell you that if you take a negative value trade over and over again you will lose money.
So let's prove this, if you lay back a team at 1.9 that has a 50% chance to win for £100 you will win £90 (£88.20 if you are on 2% commission). If you lose you lose £100, so if you win and lose 50% of the time as the prediction suggests you will win one and lose one in equal measure.
Thus, every 2 bets you place you will lose £11.80 (+88.20 for the win and -100 for a loss).
If you do not believe a price to be value, do not take it! Write this down and stick it on your wall if this is something you struggle to do.
So, we know without doubt that the practice of taking a poor value bet or trade will lose us money over time but how do we work out what value is each trade?
Think about each event statistically, what chance does the selection you are eyeing up have of winning if you were to think about it as a percentage?
Try it, this is a method I use every day of my trading career, work out the percentage chance that I think something has.
I will give you an example, say Liverpool play Norwich at home in the Premier League and their price is 1.67, I know that the market is saying liverpool will win 60% of the time. Do Liverpool beat Norwich at home 2 out of 3 times at least? For me yes! So this is a value play in my eyes the odds are too big and I will back this price.
To work out percentages I use this odds chart: http://isfa.com/odds-probability-chart.php
Now, as you develop and learn your trading skills you will start to be able to do this, you will be able to formulate rough odds and then spot prices that surprise you which you can take advantage of.
This does take some practice so why not try it one weekend, find some prices that you think are too big and write them down and see how the trades or bets would have played out.
You don't need to risk any money to do this but it is a good way of testing your skills, with ZERO risk attached to it!
If you create a system on our filter software or follow our highlighted ones you can also test the results to see what price would have made the most money.
Remember, ODDS MATTER! Again, this may sound obvious but I think it is something a lot of traders need a daily reminder of, if you cannot see value in the odds then do not place a bet or trade.
I hope this has helped, any questions just fire them over to me on our forum or firstname.lastname@example.org