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