Scalping on a Betting Exchange
A scalper is someone who profits from short term movements in the underlying price of a market. They are an extremely short term trader. The aim is to make money on the spread between between the back and lay price.
The concept behind trading is straightforward, if you back a price you must lay at a higher price, or, if you lay a price you must back a lower price to make a profit. Whatever happens your profit is guaranteed and is equal to the difference between the back and lay price.
Scalping relies on lots of liquidity in the market. It needs a constant stream on money entering into the market, backing and laying at different prices. As the price fluctuates a scalper can make money.
Betfair market liquidity makes it the betting exchange of choice for traders who want to trade in this way. For scalping on Betfair you need two things, a Betfair account and a Betfair trading application such as BetTrader.
Horse racing markets on Betfair lend themselves to this type of short term trading. A lot of money enters these markets even before the race starts, and this is the time to scalp the market.
A strict exit strategy must be implemented because one large loss could eliminate the many small gains that you have worked to obtain (i.e. "picking nickels up in front of a steamroller"). Needless to say, discipline to get out of bad trades and risk management is extremely important and if implemented properly it is possible for a scalper to make consistent profits.
Another defining characteristic of Betfair scalpers is that they usually don’t know anything about what it is they are buying and selling. They don’t use form to base their trading decisions on but rather rely on familiar and predictable short term price patterns that they have learned to recognise and exploit. A Betfair scalper doesn’t need to know anything about what he is buying and selling because often the form doesn’t apply to such a short term view.
This is true whether the scalper is buying and selling stocks, oil futures or horse racing prices. And the key to success is speed: the faster you take your profits the less risk you are taking, and the scalper avoids risk at all costs. Risk must be minimised as much as possible which means holding positions for the shortest possible amount of time. Hopefully this gives you a better idea of what scalping means.
As is often the case with embarking on a new trading strategy it is a good idea to dry run your scalping strategies without risking any money. The BetTrader software mentioned earlier in the article is available for a free trial period and has a training mode where you can get a feel for a market without putting any cash at risk.