Trading Bots

Anyone interested in trading bets on sporting events will eventually come across the term Trading Bots. A bot is simply a software application that runs automated tasks over the Internet. Trading bots developed out of Internet robots, spiders and crawlers whose task it is to analyse web pages and the links between them. Without bots, search engines like Google would not be able to offer the service they provide.

Typically, a bot performs tasks that are both simple and structurally repetitive, at a much higher rate than would be possible for a human alone. In financial markets, bots are used in High-Frequency Trading (HFT), a trading system that algorithmically selects a stock to trade, hold for less than a day and sell for profit when the opportunity arises. (see Dark Pools)

As you can imagine, analysing financial instruments, then buying and selling them in just a few fractions of a second is not something a human can do, hence the rise of the bots. HFT requires very low latency between the market and the trading algorithm and, a highly liquid and volatile market. To that end many look to co-locate their bots on servers in data centres owned by the exchanges they trade in.

In financial markets bots not only trade but also use their technological advantage to act more quickly by "front running" (an illegal activity) or through harvesting rebates from maker-taker rules. These advantages create a near risk-free environment for financial market bots but such trading is not possible in sports trading. (again, see Dark Pools). Sports trading markets are somewhat different to financial markets. There are no loop-holes such as maker-taker for large HFT style sports bots.

Types of Trader Bots

Market Makers - price up an event using statistics and look to make a profit from spread trading either side of the perceived probability of the event taking place.

Arbitrageurs - look for price mismatches between exchanges and bookmakers and also between related markets on a single exchange.

Traders - These bots look to make short term trades as sentiment changes on an event. They use many of the technical trading systems from the financial world to determine when to go long or short and when to exit a trade.

Concluding Remarks

There is plenty of scope for building bots. At present I am automating my trading to do simple repetitive tasks that require no human intervention. All three types of bots will be utilised in my trading environment.

See Also

4 comments:

  1. Hi, You mentioned traders running their bots on server rather than at home.
    I am building a bot in python. I live in NZ and wish to have the bot run on a UK service. Do you have any suggestions of a suitable service.
    Thanks
    David G. Nairn
    skier72@bookingsnz.com

    ReplyDelete
  2. Thanks for the message.

    I know that BetAngel has its VPS - see http://www.betangel.com/vps/

    But I think that will only run their software. If your bot works under Excel (or can be adapted to) so that you can interface with BetAngel then that might be an avenue to try.

    Other than that then any low-latency server provider would be fine. I have never used such a service so I could not recommend any one particular one.

    You will have to ask them pertinent questions about guaranteed up-time, other software running and access rights. Maybe give them a test program that accesses the BF API and performs tests of each of the calls that you will be using.

    My bots do not require such low latency but I am blessed with a sufficiently fast ISP. If I were outside of the UK then I would consider what you are doing.

    Good luck.

    ReplyDelete
  3. Surely bots are the worst thing to happen to a market. Its pure greed. it doesn't involve real work, just leave the computer to it, its destroying the financial markets and it will do the same to sporting markets to.

    its like everytime you got hungry they up the price of food, then wen ur no longer hungry they lower it. just wen you become interested again because of the price, they increase it again before u have a chance to act.

    its a shady activity that shouldn't be justified by 'smart' individuals or companies.

    you'll be considering becoming a pick pocket soon, as long as ur smart enough not to get caught no problem

    ReplyDelete
  4. I would argue that the markets are efficient and so bots just get the market to where it is heading, only faster.

    We entrust technology to do many tasks that we did ourselves in the past. This is just another case.

    If you are a successful manual trader then you can train a bot to do much of what you did manually.

    If you are a poor trader then don't bother with a bot, it will just lose your money more quickly.

    However, there is a difference between Betfair high-frequency trading and financial HFT. A Betfair market is constrained to prevent many of the tricks of financial HFT and also the financial tricks of market manipulation. So the two spheres are not the same.

    ReplyDelete