This is probably the skill that if you can master will turn your trading on it’s head. First of all I want to run by some of the Math behind how a market is structured. This may explain why odds move and their relationship with one another.
The market or “book” as it is also known is made up depending on what you are betting on. It might be an individual, an outcome (e.g a correct score) or a combination, Such as a first goal scorer and a correct score. It doesn’t really matter. The principle is exactly the same.
Lets have a look at a market. This is one of tomorrows races at Haydock.
The first thing I want to draw attention to is the book percentage, this is at the top of the middle column on each side of the book. We will concentrate on the back side for now. If you can spot it, above the middle column of the favourites back prices (1,65) it says 102.4%. This is 2.4% overround. A round book equals 100% That is an efficient market, meaning there is no room for error whatsoever. If it dips below 100% it becomes under round. It is then possible to back every runner and make a profit whatever the result. This is not possible due to the Betfair cross matching algorithm. If you ever see it beware, as a non-runner usually follows. When the market is liquid and is its final stages it is usually very close to 100%. It is possible to determine each runners share of a book by a simple calculation. 1 divided by the price x100. So lets take the favourite at 1.66.
1/1.66= 0.602 x 100 =60.2%
If you do this with all the runners they should add up to 102.4%
Ok, so we have established that the book will be close to 100%, but not under. What about the prices you see at the bookies? Shall we have a look at the same race with bookies prices? Lets do the book calculations for VCBet.
Zaru 1.62: 1/1.62×100= 61.7%
Eyre Apparent 4.0: 1/4.00×100=25%
Kykate: 6.0: 1/6.0×100= 16.7%
Highrate: 9.0: 1/9.0×100= 11.1%
Total of book is 114.5 %
That means if Victor has a balanced book he should make 14.5% of whatever he takes, whatever the result. Although that never happens as most bookies take a position against 1 or more of the runners to increase their profits. Anyway, I’m sidetracking. That bit wasn’t important, but it’s good to know how these things work if you didn’t already know.
We now know that the market should be close to 100%. The further away from 100% the more less a change in price affects the other runner’s prices. The market is in balance. If the odds of one runner moves in the odds on another runner or runners have to move out to keep the book in balance. I have a graphic that may help illustrate this.
Now if we have a market move on Eyre Apparent, it moves into 4.4. See what happens.
Here are 3 senarios.
1) Zaru drifts to 1.77 to take up the slack in the book.
2) Zaru stays the same, and the 2.28% of the book that Eyre Apparent has taken up has forced Highrate to 11 from 9.6 (1.31%) and Kykate to 10.5 from 9.6 (0.88%) – remember the book wasn’t at 100% – it was 102.4%
3) A combination of all 3 adjusting.
The point is, if something moves, the odds have to readjust. This is the fun bit. When you are trading a market you need to be able to keep track of what’s happening around you. With practice it becomes like a sixth sense. I have this. A few weeks back I went into my lounge, immediately I knew something was different. I couldn’t put my finger on it. Something had changed. Anyway I found out a few days later we had a new sofa 🙂
If the race your trading has 3 runners priced between 3 and 3.8 this becomes almost too difficult, The more runners you are tracking the harder it becomes. There is a reason for this i will try to explain.
If our fav Zaru was to drift out 6 ticks, that would lose 2.06% of the book. To put that into perspective. The price on Highrate could move from 9.6 to 8 to take up the same amount of the book. This could be taken up as I attempted to explain with the graphics across multiple runners.
The shorter the odds the less they have to move to effect the balance of the book. So our 3 runners trading between 3 and 3.8 could move in a tick here and there each and have the same effect on the book as a big move in odds on an outsider. One is very easy to spot, the other very difficult. – This is important to understand.
If a horse moved from 9.6 to 8 and the favourite held it’s price against the move and the movement in the book was taken by the other runners you can be confident as soon as the momentum is exhausted on this move and it drifts back slightly the favourite will move in. This is a big signal and very common.
This subject is work in progress. It’s complex and difficult to explain (for me anyway). This is part 1. More to follow. Really appreciate your feedback on this. Is it too heavy? Is it understandable? I need to know where I need to go with it to make it easy to understand.
If you have any questions about this you can email me at firstname.lastname@example.org
I have a spreadsheet you can play with to help explain this further- Download it HERE
Part 2 is HERE