There are just three basic trading strategies.
1. Technical trading
2. Trend following
3. Swing trading
Now of course, in practice there are a lot more than three specific sub-strategies but I would argue they all essentially derive from these three basic approaches.
Entire products often sit beneath a single heading: for instance Pre-Match Trading and my very own Skewtrader Pro are both examples of type 1.
So what difference does this observation make?
Well, I would like to propose that they present a natural development path for beginners.
Step 1 is easiest.
Step 2 is a bit more challenging.
And step 3 is a roller coaster ride: but also where the biggest profits (and losses) are to be found.
Today I’m going to look at Step 1, with the others to follow in later articles..
Step 1 – Technical Trading
It’s a remarkable fact that the betting markets are riddled with inefficiencies.
Lazy punters will insist that Betfair is now so liquid that efficiency reigns.
And up to a point, they’re right.
If you look at the Match Odds market for most Premier League football matches, you will see efficiency in action.
The market moves like a slug in sludge and trading becomes nigh on impossible.
But the point is : The Market does not exist in a literal sense. Certainly not the way in which you tend to think of a main Stock Market, for instance.
Instead, it’s endlessly fragmented into many smaller markets. And there are opportunities to play across them everywhere.
Consider. There can be hundreds of different markets for each major football match on every bookie and exchange website. So that means thousands of different sets of prices are available for comparison on each game.
Inevitably, they can’t all move together.
And they don’t.
The most obvious outcome is the well-documented arbitrage opportunity, about which I’ve had plenty to say elsewhere.
But there is a lot more to it than this.
Pre-Match Trading benefits from variances in the speed at which different related markets move. Some markets simply react to events more quickly than others.
Skewtrader Pro, on the other hand, exploits structural, rather than timing differences between markets. I will give you another example in a moment of how market structures can be exploited to our advantage.
You should consider these products if you’re new to trading in order to move on from basic arbitrage. They are proof that trading need not necessarily be risky.
Both achieve high strike rates without exposing you to the lurches and market suspensions associated with methods that involve placing bets in play.
It is interesting to consider the way in which markets are structured at Betfair.
Between prices of 1 and 2, you can trade in hundredths of a point.
Between 2 and 3, you trade in two hundredths.
From 3 to 4, it’s twentieths and then from 4, it’s tenths.
From 6, it’s fifths of a point until you get to 10 and then you’re looking at half a point for every step.
And so matters continue all the way up to 1000, with the ‘rungs’ on the ladder gradually widening out to reach huge 10 point gaps at the top.
Do you sense an opportunity here?
A locked-in back and lay trade from 10.5 to 10 covers just one Betfair rung. As does the next step down from 10 to 9.8.
But the first of these two is worth half a point whereas the latter buys you just one fifth.
It thus follows that one possible strategy may be to trade markets that sit at these structural switch points. Offer a lay price of 10 (which will appear on the back column of the market) and then aim to back at 10.5, 11 or 11.5.
Once your lay is matched, every point the market moves for you is worth 150% more than each one against: for such is the relative value of a 0.5-spaced rung against a 0.2 space.
You can even combine this method with other types of trading.
I will have more to say about trend following in a later article. But there is no better time to jump on a trend than when it crosses one of the switch points.
I would encourage you to think creatively about technical trading as a relatively safe way into the trading world.
I’ll be back with my next article in this series soon, covering Trend Following.
In the meantime, if you are ready to move beyond simply making predictions, why not consider low-risk trading?
Perhaps try rung trading with small amounts – and see how effective a way it can be to stack the odds in your favour.
And I’ll be back with more about trading shortly.