6 Books to Start You in Sports Trading

I have recommended a lot of books on this blog. If I had to recommend a small subset of books for you to start your sports trading career then the following six books would be the ones that I would choose. The selection would also be of interest to the intermediate trader looking to improve.

You will notice that there are no handicapping or form following books amongst the selection. Nor any books on speed or biomechanics. You don't need to know what makes one horse better than another to make money from horse racing. The same can be said about other sports too.

As I have said before, market structure and simple concepts from financial trading are more important than the sports themselves. Let the market determine the price. You just need to trade on its movement whilst the market discovers the true price of an event.

Here are the books that you should be reading to give yourself a head-start in sports trading.

Efficiency of Racetrack Betting Markets


This is the book that started me thinking that market structure was more important than fundamentals.

After reading this book in the 1990s I stopped trying to determine which horse would win a race and concentrated solely on the horse most likely to yield me a profit.

The book is an anthology of academic papers written mostly by researchers in finance using sports betting markets as a proxy for financial markets.

Although it is an expensive book the papers are written by such authorities as William Ziemba (Doctor Z) and Willian Benter (a famous bettor on Hong Kong Races).

Amazon - Efficiency of Racetrack Betting Markets

Taking Chances: Winning with Probability

Probably the most complete book on gaming and probability that you could wish to own.

Written by Dr John Haigh from the University of Sussex the book takes the reader through the required amount of probability theory to understand the topics in the rest of the book.

Topics covered include football,horse racing casino games and other game of chance where people may be tempted to back their opinion with cash.

Also included is a thorough working of Kelly Criterion for both single and multiple bets.

This book remains on my desk and never gets put on the shelf.

Amazon - Taking Chances: Winning with Probability

Sports Trading on Betfair

An excellent book that teaches aspects of market structure to beginner and intermediate traders.

Wayne Bailey teaches the importance of the integer prices (2.0, 3.0, 4.0 etc.) as support and resistance points. He explains in clearly and concisely two methods for scalping that do not rely on the usual scalper hunces.

The book also covers more traditional technical trading systems from the financial world. These systems include support and resistance trading and swing trading. Also covered is Dutching, arbitrage and weight of money (or weight of movement as it is called in the book). There is a also some tentative analysis of inplay system trading.

Full review here

Amazon - Sports Trading on Betfair

Secrets of Successful Betting

This book is full of information about how horse race betting markets work. Starting with a history of bookmaking, the book teaches you how bookmakers ply their trade.

Later chapters demonstrate how to perform arbitrage, Dutching, multiple bets, hedging, coupling prices, making a backer's book and deriving place prices from the win markets.

A very useful book indeed and one that I know many readers of this website have bought.

Although it is now out of print, the book can still be picked up secondhand, at a reasonable price, on Amazon.

Full review here

Amazon - Secrets of Successful Betting

Calculated Bets: Computers, Gambling and Mathematical Modelling

Steven Skiena of Stony Brook University has a lifelong passion for the sport of Jai Alai, a ball game from the Basque region of Spain. Akin to squash, the game is played with baskets attached to the hand rather than with racquets held by the hand. The book details Steven's building of a model for the game of Jai Alai with which he used for betting on the games.

Steven builds a Monte Carlo simulation of Jai Alai so that he can test his theories about the likelihood of any one particular player in a matchup winning the event.

All-in-all this book is a fascinating read. Some find it hard going but I can appreciate all the hard work that Steven has put into mastering modelling a sport and betting on it. If you want to know what it takes to model a sport and build a bot to place bets then you need this book at hand. You won't learn how to program specifically for your requirements and this book was written before Betfair took off. However, you will learn what it takes to dedicate yourself to a related task.

Full review here

Amazon - Calculated Bets: Computers, Gambling and Mathematical Modelling

How to Find a Black Cat in a Coal Cellar

http://www.amazon.co.uk/gp/product/1843440679?ie=UTF8&camp=1634&creativeASIN=1843440679&linkCode=xm2&tag=thegoodlife08-21This book has two uses. Ostensibly the book was written by Joseph Buchdahl, who owns tipster evaluation websites, to demonstrate how he goes about evaluating tipsters. Usually, to the detriment of tipsters as most of them are either rank amateurs or fraudsters.

However, the book can also be used by the system builder to evaluate their own success.

If you don't have time to trade then this book will help you to develop a portfolio of tipsters' systems for you to invest in.

Full review here

Amazon - How to find a Black Cat in a Coal Cellar

Sports Trading on Betfair

This book is a recent addition to my library. Self-published by Wayne Bailey, owner of the blog Wayne Bailey Racing and a regular writer on betting in The Irish Independent newspaper.

I am always rather dubious of self-published works. There are many self-publishing platforms and it is easy to search for the publisher of a book to determine if the book is an act of vanity publishing.

Many books promising get-rich-quick schemes, of which gambling is an obvious example, are self-published either because a reputable publisher does not want to be involved in telling untruths or because the author has no expertise in what they are writing about.

That being said at least Amazon allows you to read the index of any book it sells to determine if it is worth a read. I was drawn to the contents of this book and so I decided to buy it.

Having read the book I can say it is certainly one of the best self-published books on sports trading that I have read. Indeed there are some things in the book that some traders might wish had never been published but which will now be in the pubic domain.

As is usual for this kind of book the opening chapters consist of the basics about how exchanges work and obtaining 3rd party software with which to trade.

When asked about my trading style, I like to say that I trade market structure more than anything else. I don't know anything about horses or horse racing but I do know markets, no matter what is being sold in them.

I can see from reading this book that Mr Bailey has understood the structure of horse race betting markets and uses this information to his advantage. A lot of it is psychology combined with the way the exchange is set up.

The first topic in the book points out the rather obvious fact (although many people still haven't noticed it) that the integer odds (2.0, 3.0, 4.0 and so on) are very important when trading.

Looking at 2.0 we see that 2.1 is 5% greater than 2.0 and 5 ticks above. However, 1.9 is 5% below 2.0 but 10 ticks below. This is because at 2.0 we are transitioning from a 0.02 per tick change above 2.0 to 0.01 per tick change below 2.0

For a layer, this is good because we have so much more leeway if the best goes against us. There is more upside to a price drifting out and resistance if it reverses. This is true for all the integer odds.

This is what I call trading market structure. It has nothing to do with the sport or its participants but everything to do with how the market is set up. And this is what makes Mr Bailey's book a cut above many others.

Mr Bailey then moves on to scalping and does so in a far more intelligent way than I have seen before. Watching YouTube videos or reading other blogs or forums you would believe that successful scalpers have magical powers. They don't. Through reading this book a logical reason for profitable scalping is given.

You won't be a successful scalper if you don't have the correct psychological profile, the right software or hardware but all things being equal the two scalping systems Mr Bailey gives are the ones that I have used successfully. In fact I don't like to sully the techniques with the word 'scalping'. It is common sense one-tick-trading.

The book also covers more traditional technical trading systems from the financial world and that I also use. These systems include support and resistance trading and swing trading. Also covered is Dutching, arbitrage and weight of money (or weight of movement as it is called in the book).

There is a also some tentative analysis of inplay system trading. Although, Mr Bailey states that he is new to this and working on new systems. However, he does talk you through some of his current systems to give you an idea of how systems are built.

All-in-all I recommend this book to all beginner and intermediate traders looking for new ideas. The main thing to learn is how to trade market structure more than anything else. That is how I trade the markets and so should you.

Amazon - Sports Trading on Betfair: Profitable betting exchange systems and strategies for trading on Betfair and Betdaq

Scared money

When I used to play poker in one of London's casinos you would often hear the phrase "scared money". The phrase refers to the cautious players, beginners etc. who didn't want to risk too much money.

These players would play with a very small stack of chips in front of them and when it was gone they would walk away. They would do all they could to protect their little stack of chips and that meant dropping hand after hand until they had a monster. All I had to do was drop my hand whenever they kept theirs.

My bankroll for such games was always a lot larger than my opponents. They would buy in for £50 or so. I would buy in for £500 or more. There was never any intention of using the full £500. I just wanted everyone to know that I had them covered. The value of my stack was immediately forgotten as I tried to bully people out of a hand.

Poker is more about finding the right players to play against than anything else. Whenever I went to the casino I would say, "Hello" to my acquaintances, as I passed them by, heading for the easiest table I could find. Usually, a table with tourists or people I knew that had just started coming to the cardroom and were still learning the game. But what has this to do with sports trading?

A common question from beginner traders on the forums is, "What size should my bankroll be?" Alternatively, they will say, "I am going to start with £50 and see how it goes." Immediately, I know their money to be scared money.

A common outcome for a beginner's small bankroll is that it will dwindle away because the fear of losing the bankroll doesn't permit them to trade effectively. When they start trading, all they can see is a zero, sometime in the future, at the bottom of their spreadsheet's profit and loss column.

From that moment on, the beginner trader will be more concerned with not losing money rather than winning money. Any small reversal against them and they are out for a loss, only to see the market swing back in their favour.

Before you determine a bankroll size, you need to determine a winning system. That system will have an expectation or expected value, in other words, how much you can expect to win per £1 bet. Of course, you cannot expect to make exactly what is expected. Indeed, a winning system can lose for while and a losing system can appear to win before reverting.

There is no real answer to the question, "How big should my bankroll be?" Your bankroll should be big enough to cover the volatility of your trades. Only experience and a history of previous trades will give you a value for the variance of your returns.

Whatever bankroll you decide upon, its value should be forgotten. Your prime concern now is to trade to win and never not to lose.

High-Frequency Trading on Betfair

BetAngel is now offering co-located servers for trading on Betfair and BetDAQ. This is a new service and not related to the original VPS that they offered.

The servers are not as close to the exchanges as in financial trading (where the distance between exchange and trader servers is measured in metres) but as close as Betfair will allow you to get.

Already, BetAngel have reported denial of service attacks on the servers (see here) to deny or slowdown the service. The chief suspect being those who wish to protect their preeminence on the exchange.

In the past I have reported on Betfair's use of their own traders and bots to increase profits and that Betfair's exchange is probably a dark pool. High-frequency activity by sophisticated bots leads one to believe that the playing field is not level for all participants.

Maybe it is time for tighter regulation of betting exchanges to ensure that the public are getting a fair deal.

I am keen to move my own bots closer to Betfair's data centre. However, after reading of the problems that BetAngel are having, I would locate my bots to servers that are not advertised as being dedicated to giving the fastest access to Betfair.

Still, I wouldn't put it past an exchange to have a team of people logging access times and running a bespoke attack on an IP address, no matter where you are located.

More so than ever, as with the financial markets, making money from sports betting has less to do with sport and more to do with market structure and taking advantage of it.

Further Reading

Betfair bot observations

Betfair, a form of dark pool?

Dark Pools: The rise of A.I. trading machines and the looming threat to Wall Street

Which financial indicators suit sports trading?

You've all seen them. Take any 3rd-party sports trading software and you will find a myriad of indicators. From candelsticks to moving averages, to the odd sounding Bollinger Bands and stochastic oscillator.

The novice with no idea of how to trade sports markets will open up a trading ladder and see the prices jump from one place to another and wonder what to do next.

They will then open up a chart and see the time series snaking up and down. Again, they will wonder what it has to do with profiting from sports trading.

Finally, the novice will open up the indicators list on the chart and wonder which of the many indicators will divine untold riches. Everyday, I see these novices in the online forums. They have heard that some people get rich from sports trading and they want the short-cut route to joining them.

Sports betting is usually done on the day of the event. In that respect it is like financial day trading. Yes, there are sports markets that open before the start date. For example, horse racing markets usually open the night before but volume is thin and volatile. The classic flat races, The Grand National or The Gold Cup markets will open far in advance. However, in the main, the window for trading a sports market is pretty small.

Sports trading in the temporal aspect is very different to financial trading. In financial day trading there is always tomorrow. A stock, a currency pair, option or futures contract will still be around tomorrow even when you stop trading today. In sports trading you get one day in which to profit from the event.

When trading sports markets things happen that much more quickly. Financial indicators are usually used on a day by day basis rather than second by second. Also, financial assets are priced to the penny. Sports betting markets are priced by odds and the jumps between the odds are not continuous.

An indicator such as a moving average is just that, an average, used to smooth out a time series. Such indicators don't work so well when they are working with discrete prices such as the range 2.98, 3.0, 3.05 and 3.10. Range indicators such as Bollinger bands are easily broken through and may offer a false signal.

Sports trading is as different to financial trading as it is the same. The buying and selling, supply and demand is the same in any market. However, the underlying structure of the markets is very different. The similarities between sports and financial markets are only superficial and because of that I have thrown out all financial indicators and developed my own sports trading indicators.

As I have said before, 3rd-party trading software can force the unwary to be trapped into a trading regime dictated by the software they use. I started trading using 3rd-party software but now I code my own trading software. Doing that has freed my mind to appreciate the differences between sports and financial trading markets.

Betfair bot observations

Spend any length of time on Betfair's exchange and you will see bots in action. A lot of bot action is instigated by Betfair itself.

To a large extent Betfair's sports betting exchange is a dark pool. However, I don't believe any of the users are getting preferential treatment as the High-Frequency firms are in the financial markets. More that Betfair itself has bots running on the exchange to hoover up loose change.

Maybe dark pool is a strong term, considering its negative connotations in the financial world but the exchange exists to make Betfair's shareholders wealthy people.

Now, Betfair has its own traders and also its own fixed odds service for those who just want to bet and not get involved with trading. The more profit Betfair makes the happier are its shareholders. Betfair's traders will have their own idea of where prices should be. Coupled with that is demand from the fixed-odds service, which means that Betfair is always dipping into the exchange when it sees a value arb or wants to balance its book.

When there are large gaps on the ladder I like to place minimum £2 bet (sub £2 bets tend to be ignored - hence my view that Betfair is involved) here and there to see how the bots react. If there is a one or two tick gap in the spread I might place £2 within the spread to see if the bots are backing or laying. More often than not your £2 is taken within the blink of an eye.

Again, I don't think anyone is getting preferential treatment but that sort of speed suggests some form of low-latency activity. And, as Betfair does not (to my knowledge) permit co-location then that is probably a bot inside Betfair's data centre snapping up my £2.

Not only that but the bot appears to have a quantity in mind that it wants to take. If you fire in multiple £2 bets quickly enough you will sometimes see the amount that the bot would like to back or lay. There will be a fleeting moment of the amount used to snap up your £2 and then it will disappear.

For example, if I continuously place a lay bet of £2 in rapid succession on an empty price in the grid and do it fast enough then I will first see maybe £50 hit my £2. The next time I place £2 the bot will jump on it with £48. The following £2 bet will be hit by £46 and so on until the bot has attained the £50 position. Obviously there is someone out there desperate to open a £50 position at that price.

I assume that the volume is removed immediately after grabbing the £2 so that it too is not snapped up by another bot. This all gives credence to my view that this is a Betfair bot with, I am sorry to say, an unfair advantage. An advantage that supports my view that the exchange is a kind of dark pool with different rules for different users (the users being Betfair and then us).

Another thing you can do is place your £2 in a large gap that might have developed between backers and layers. Within a split second more volume will be placed on and behind your £2. On thin volume you can place your £2 on an empty price behind the front backs and lays. Again, it will set off a flurry of activity.

After a few bets have been taken on either side of the spread you can see the return legs of the bets being placed on the other side of the spread. More often than not these bets are placed in anticipation of movement and bets to be matched in the future.

Finally, about 20 minutes before the race the ladder will suddenly fill with volume a good 10 to 20 ticks either side of the spread. It's not a gradual ramping up of volume. It just appears in a split second. Maybe it has something to do with Betfair's fixed-odds sports book.

Not only that but the amount of volume (even far away from the spread) is constantly changing. I believe it might have something to do with fixed-odds and/or SP betting but that is not my field of interest so I'll leave that for someone else to work out.

There is a lot of maths going on in Betfair horse race betting exchange and most of it doesn't have anything to do with horses. That is what I find so fascinating about exchange betting; market structure. There is so much more to making money from trading the structure of the market and I enjoy learning about it.

I hope you enjoyed this article. I would be interested to hear your thoughts.

Nice hobby - I wouldn't do it for a living

These days, making money from horse races has little to do with horses. I wonder why many people (I call them 'The Old Boys' hence the photo) still analyse past horse race data.

In finance we call them fundamentalists, people who read reams of data to ascertain a true price value. As with their religious counterparts these fundamentalists are very rigid in their thinking. Nice hobby but I wouldn't want to do it for a living.

Who wants to earn money whereby on some days you make a loss and you have no idea why? Is the betting system broken or does it have negative expectation and will fail anyway? If you have what it takes to be a trader then after the intial learning curve there will be very few losing days, if any at all.

If I have a low yielding day from trading then I can usually narrow it down to getting stuck on a horse and over-trading. Either a reversal was missed and I had to trade my way out of it or I tried to noodle around scraping up pennies on narrow margin trades. Either of these two will add turnover for little return thus impacting on yield. Over-trading being my sole concern, trading is a lot easier than betting.

This morning, I awoke at 9:10AM, a little late as I have Seasonal Affective Disorder. I normally sleep with the curtains open so that sunlight awakes me naturally, every morning. In the summer, I leap out of be at 5AM to start the day. In the winter, if the day is as overcast as today then I drag myself out of bed at between 8:30AM and 9:30AM.

As with any morning, the first thing I do is to switch on the PC and start my software running. I am very happy with the code that I created using the new Betfair API. The ability to monitor every runner in every race has increased the amount of trading I do. More trading leads to more turnover and more profit.

The names of race courses, runners, jockeys, owners and trainers are unknown to me. All I am interested in is trends. By 10AM I have started to open some positions and by the start of the first race I have opened all the positions that I am likely to open that day and have profits that give me leeway to speculate when the larger volume starts arriving before the off.

For most of the day its a case of monitoring positions. A position might reverse and it's a case of easing into a new trend or closing out for a minimal loss. Nearer to the race start time I will start selling my position back to the market, a little at a time. Initially, to lock in a profit and then to make the most of it, if the position has done very well.

At no time do I look at a horse race. I know that other trades have a video link to the race but I never do. Any shenanigans in the paddock, leading up to the race start, will make itself known to me in the price but by then I will already have profits with which to cashout or use to trade a new position with.

Whenever I read online forums dedicated to form, I am always amused. By and large the systems they come up with are so specific that I doubt they will be used much. Broadcasting them to the world doesn't help either. The idea of placing a bet on a horse and waiting for the end of the race is anathema to me. I am done and dusted before the race starts.

The late afternoon and evening is for me to do with as I please. No reading form nor watching videos of previous races. The hard work was in understanding how betting markets work. By that I don't mean the simplicities of how backing and laying works and the overround. There is a lot more to betting markets than that; such as structural and psychological factors.

Much of the structure of a betting market is very subtle but easily understood by any finance quant. Whilst most form followers could never understand how to trade, many people who trade profitably do so minus a lot of knowledge that could make their trading even more profitable. Using 3rd party software with which to trade many traders are constrained by the capabilities of their software and do not have the imagination to try new avenues of thought.

I have a simple motto and it goes like this "I like going to sleep every night having learned something new." Even though I am a profitable trader I am not resting on my laurels. I am constantly developing new ideas, coding improvements to my software and researching the effects of little anomalies I notice during the day.

If you want to make money from horse racing then forget the horses. For me the only aspect of horse race betting that involves horses is the fact that without them I wouldn't be able to trade on the races. For that I am grateful.