Reading a Market- Part 1

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 know 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.

210 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 a market is liquid and is it’s 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 way from 100% the more less a change in price effects the other runners 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.

reading a market 1

 

 

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.

reading a market 2

 

 

 

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%

reading a market 3

 

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 mugsgame@hotmail.co.uk

I have a spreadsheet you can play with to help explain this further- Download it HERE

Part 2 is HERE

 

 

 

 

 

 

 

 

22 thoughts on “Reading a Market- Part 1

  1. Adi Bexon

    MG,

    A great insight on how to read a market particularly for myself who is fairly new to trading.I’m learning a great deal.Its very understandable and look forward to the next installment.

    The videos that you’ve put up in the last week are a great addition on how to trade these markets.You give a personal insight of your own views on how to achieve profitable trades (In the main very successfully!!!) Again, for a newbie this sort of information is invaluable.Long may it continue.

    Regards
    Adi Bex

    Reply
    1. MG Post author

      I’m glad it makes sense Adi, I was worried it was to technical. The technical side of it isn’t really important. The important bit is if something comes in, another (s) move out to accommodate this. Appreciate your comment MG

      Reply
  2. peter

    hi mugs,
    understanding the overround and how it works is what got me started trading,i think your explanation is good and easy to understand for all the newbies.i really like the part about the new sofa,that happens to me all the time.this can take over your mind,the amount of times i go to bed and have markets flashing through my mind,good and bad,anyway my wife is used to it now lol.by the way this is the first time i have seen the overround talked about in any forum etc,so it just instills my confidence about you,top man.
    reguards peter
    ps just a thought,why not do a poll on peoples ages who follow your blog,im 46 and my son is 23 ive been trying to show him an alternative way of making a living for years,we dont need the rat race,it may be intersesting

    Reply
    1. MG Post author

      Cheers Peter, This is a tough subject to explain. Hope I have done it justice. MG (Good idea about the Poll)

      Reply
  3. Gary

    Good stuff.
    Look forward to more in-depth info. I understand all the basic stuff as I do trading but wish to improve my knowledge and trading ability

    Reply
  4. Andy

    An excellent explanation of how the market works, very good and it wasn’t too technical. Loved reading it and the videos are just outstanding !!

    Keep up the great work, you are a true inspiration, thank you.

    Cheers

    Andy

    Reply
  5. miroos

    Hi MG,

    Excellent stuff from you.Your explanation is so clear.This stuff I understand and I’m looking for next parts.
    With you I may improve my knowledge.

    Many,many thanks for all your works.

    Reply
    1. MG Post author

      So glad you are able to understand. It must be particularly difficult for Non English as 1st language guys. Thanks so much for letting me know. Thanks MG

      Reply
  6. Brian

    Just started to make a profit after 3 years having watched your videos. Like your banter. This technical explanation is excellent.

    Reply
    1. MG Post author

      Cheers Brian. Crikey, I must be better than I thought. I just waffle on and talk bollocks most of the time :) Seriously though, I am made up you have turned that corner.When the penny drops it’s a great feeling isn’t it? WD mate MG

      Reply
  7. Steve Hari

    Hi Steve,

    Same as Brian above – having watched all your vids the penny has dropped and profit now coming through. All the bollocks everyone else does is just promotional rubbish highlighting them as being geniuses. The real world is different and that’s what you show. The best thing is it ain’t rocket science – you just have to get it.

    Regards

    Steve

    Reply
  8. Adam

    Best site by far for informative, need to know info, the piece on overround and how a steamer which doesn’t affect fav then fav comes in is priceless! Well done

    Reply
    1. MG Post author

      Really glad you picked that up Adam. trading doesn’t have to be complex. If you can simplify it, it works better. What’s that old analogy? KISS. – Keep It Simple Stupid. Well I am stupid and I keep it simple :) Appreciate you comment. Cheers MG

      Reply
  9. Simon

    Hello MG

    Very informative article on how a market works, really enjoy the videos as well learning a lot about trading from them.

    Also thank you for the very helpful comment you made on my post on the BA forum regarding laying in running when the selection appears to have no chance of winning (dmbusa). Just sorry I missed it at the time you posted it.

    Cheers

    Simon

    Reply
  10. Caldas

    Im ansious for part 2 , plain and simple explanation , straight to the point…. You have got yourself a fan here

    Reply
  11. claus

    “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.”

    Hi great article,much appreciated! How accurate can we be in our judgement of when the momentum has reached it´s max exhaustion? Within the range of 1-2 ticks? just curious..

    cheers

    Reply
  12. Stefano

    This is THE BEST BLOG I came across so far!
    My English is awful but finally I can understand some principles behind the scenes and I really enjoy learning from your posts and videos!
    Thanks a lot for that and for share your knowledges!
    Bets,
    Stefano

    Reply
  13. Karan Chaand

    This is just so beautifully written, Steve.
    A big thank you to you for being interested in sharing your knowledge and helping novice traders like most of us.

    Reply

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