The term cold trading refers to a group of Betfair traders who enjoy trading before their particular event has started, this is possible in a few markets but the market where it tends to be consistently profitable is the horse racing market.
So how can you possibly trade and make money on a market before the event has started? This is made possible by two factors, firstly the majority of money on any particular horse race is placed before the race take’s place and that affects the starting odds more than any other sport.
Secondly a large part of the money that goes down before the race is placed by cold traders, which helps the market to move and movement is what you need to make money on Betfair.
A cold trader has no interest in the outcome of any race that he’s involved in, this is because by the time the race is under way the cold trader has already made his trade and has moved onto the next event.
A simple example of cold trading is as follows; Mark decides he wants to cold trade at the 2:30 at Chepstow, he log’s onto Betfair at 2:00 pm and finds the correct race. At 2:15 he make’s a bet on second favourite Marching Hare, which is priced up at 4.0 he puts £50 on and so is looking at a £150 profit (minus Betfair commission).
Soon after he puts the bet on, things start to go his way and the odds click down to 3.85 so he now places a lay bet for £51.50 meaning his liability is £146.77 meaning that he will win £150 if Marching Hare wins, he’ll get £150 from the first bet, but will lose £146.77 from the second bet, giving him a profit of £3.23p.
If Marching Hare loses (comes 2nd or worse) then he will lose his £50 ‘back’ bet, but will gain £51.50 from his ‘lay’ bet, thus giving him a profit of £1.50p.
The above scenario is if things go Mark’s way, but let’s see what happens if things start to go wrong. Mark puts the £50 bet as before on Marching Hare at odds of 4.0 at 2:15 pm but soon after things start to go wrong and the odds move to 4.15 so Mark places a £48.50 lay and has a liability of £152.77p
So now if Marching Hare wins Mark wins £150 from his first bet but loses £152.77 from his lay bet, thus giving him a loss of £2.77
If Marching Hare loses he loses his £50 back bet and wins his £48.50 lay bet, giving him a net loss of £1.50, this is known as a stop loss.
It is important to study the second scenario and to prepare for it, depending on what type of person you are in regard’s to how risk averse you are, will depend on how far you let winnings or losses go before you trade.
For instance you might be a one/two click cold trader, meaning that if you enter a market at 4.0 you are waiting for it to go to either 3.8 (ideally) or 4.1 before you trade, this will ensure a small profit or a small loss; crucially the win is always set bigger than the loss, that way if you end up achieving a 50/50 win-loss scenario over time, you’ll still be in profit.
How do you gain a competitive edge when cold trading horses?
This question is important in any market or any type of trading, because a competitive edge is what can give you that jump start on the market and help you get good odds on a market outcome before anybody else realises what a great market it is.
My favourite way is to look at what the tipsters are tipping, look at the ones in the national newspapers, because of their readership numbers they can have a lot of sway in the odds market.
Look at local newspapers and not just the ones local to you, try and find ones online with horse tipsters, you might just find a tipster who is on a winning streak in the Dudley Evening Echo or some such paper. This is important because if he’s on a winning streak then hopefully he has a lot of people listening to him and backing his selections forcing down the odds of those selections.
Use Twitter, as it’s a very powerful tipping tool and as well as following Betfair Trading Tips you should follow as many horse tipsters as you can, if you find them offline in a newspaper then try and find them online, go through their tweets look at how it’s been going for them.
Once you've gathered all these tipsters check out the odds for the horses they tip, without trading on them at first, keep a close eye on what they do, note it all down in your trading notebook. Hopefully you’ll find a tipster who every time he tips handicapped races his selections come crashing down in odds, all great news for the cold trader.
It is possible to do cold trading without the use of trading software, but if you feel that you are going to spend a lot of time and money cold trading, rather than something you do now and again if you fancy it, then you should probably invest in trading software.
The main advantage of using one of these Betfair/Betdaq bots is that you can plan in advance and automate a lot of the process. The main tip with trading software is to get fully used to it in practice mode, so that you can learn with play money and not your hard earned cash!
So let’s summarise with; The Golden Rules Of Cold Trading:
- Decide beforehand how many clicks up and down you are going to let a price go before entering into a trade.
- Never ever let the race start, cold trading is just that, it is for trading whilst the market is cold, once the horses are running their muscles and the market get’s hot!
- Be prepared to accept small losses and always set your wins higher than your losses.
- Find horse racing tipsters who affect the odds with their tips.
- Find a trading bot that work’s for you and use it.
The last rule is essential, you can do what I've explained above yourself, but if you’re a beginner then you’re going to spend a lot of time working out how much money you should back or lay with, in that time the trading opportunity can disappear.
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The Zen Trader