As a newcomer I suspect this has been asked before but a couple of comments in one of the other topics has made me ask 'where does the money come from'. Perhaps more appropriate where does the profit come from.
One user commented that he was feeding money into the system and that he had realised it was a bad idea. If I am to profit out of trading someone must be making a loss because money is moving into my account from somewhere else. Is this the 'real' punters who are backing horses in a traditional manner or is it other traders who are just bad at it, people like me who are learning and therefore put 11p into the market yesterday for example!(those spikes again, I was 18p up at one stage). If its the latter then surely trading is a bit like pyramid selling in that the supply of 'newbies' is eventually going to dry up and no one will make money. If its the former then we all have to hope the compulsive gamblers out there continue to throw money down the drain and don't suddenly see sense!
Where does the money come from
I found this thread again this morning. If you look at this ladder, you can see a huge amount of money traded at 3.70 & 3.65. Say you were some sort of trading god and managed to put £400k through on each side and greened up. You would have made £5405 on this trade. Of course that's completely unrealistic and you also have to assume that some of this volume has been scratched or traded out.
But basically people backing or laying at either 3.70 and / or 3.65 for any reason have generated that potential. The potential profit has come from a minor difference of opinion. How much is traded and how much is normal punters is difficult to tell as Betfair have never released figures which detail this. Well they did, but it was a long time ago, 2003. Back then about half the money was traded.
But basically people backing or laying at either 3.70 and / or 3.65 for any reason have generated that potential. The potential profit has come from a minor difference of opinion. How much is traded and how much is normal punters is difficult to tell as Betfair have never released figures which detail this. Well they did, but it was a long time ago, 2003. Back then about half the money was traded.
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CaerMyrddin
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Hi Peter, but couldn't we say that betting in general is a simply a zero sum game?
http://en.wikipedia.org/wiki/Zero-sum
A bookie can only profit what their punters loose (at a certain point) and traders can only profit what others lose (could be other traders money, bookies, punters...)
There is no richness created, only 'tranferred', am I right?
http://en.wikipedia.org/wiki/Zero-sum
A bookie can only profit what their punters loose (at a certain point) and traders can only profit what others lose (could be other traders money, bookies, punters...)
There is no richness created, only 'tranferred', am I right?
Well, if you think about what markets are actually doing they are predicting the future (they are 'prediction' markets). The prices are supposed to reflect the odds of a particular outcome. For instance if a horse is paying $2, the market is saying it predicts a 50% chance of that horse winning.
The value created then, is in the calculations of the odds. For instance, in sports, the markets are supplying useful statistical information about the odds for those interested in sports.
The value created then, is in the calculations of the odds. For instance, in sports, the markets are supplying useful statistical information about the odds for those interested in sports.
With reference to CaerMyrddin's post of:
There is no richness created, only 'tranferred', am I right?
Yes, you are right. No-one is playing the markets hoping to lose and the only money to be won is from those who do lose. It's actually worse than that because you have to also account for the commission that Betfair take from each winning bet.
Imagine that you and I each had £10 and only bet against each other. Sometimes I win and sometimes you win. As long as we don't bust each other outright hypothetically eventually we will both go broke and all the money will be in Betfair's pockets because of the commission that each winning bet pays.
This is also true in the wider sense unless money keeps getting injected into the market but the total prize pool is so large I don't think we need to worry about it. There are always new starters coming in but more importantly there is other money that isn't opinion led, such as bookies offsetting their risk etc.
Cheers.
There is no richness created, only 'tranferred', am I right?
Yes, you are right. No-one is playing the markets hoping to lose and the only money to be won is from those who do lose. It's actually worse than that because you have to also account for the commission that Betfair take from each winning bet.
Imagine that you and I each had £10 and only bet against each other. Sometimes I win and sometimes you win. As long as we don't bust each other outright hypothetically eventually we will both go broke and all the money will be in Betfair's pockets because of the commission that each winning bet pays.
This is also true in the wider sense unless money keeps getting injected into the market but the total prize pool is so large I don't think we need to worry about it. There are always new starters coming in but more importantly there is other money that isn't opinion led, such as bookies offsetting their risk etc.
Cheers.
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CaerMyrddin
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Thank you for your reply willooo!
I always loved game theory and all of it's dilemmas, so always like to put some theory into it.
I am not worried at all
, I am not a big shark, but I already can put some smart moves into the market. I would just like to underline the competitiveness (does this word exist?) of the markets 
I always loved game theory and all of it's dilemmas, so always like to put some theory into it.
I am not worried at all
, I am not a big shark, but I already can put some smart moves into the market. I would just like to underline the competitiveness (does this word exist?) of the markets We all need fresh money coming into the market or else it would die, but bear in mind this money can come from anywhere and as Betfair gain market share over casual punters it is likely to come from there as well. People basically coming to Betfair to get better prices.
I think it's interesting to see the subtle shift, maybe it's my imagination, in how people approach Betfair. Maybe it's because Betfair tends to attract smart money rather than the casual money?
When I started people viewed Betfair as a great opportunity. With the book % so close to no over round people saw an opportunity to get an edge. But now people don't seem to view it with much relish. The dividing line between break even and a loss is so small I would have thought people would still view this as a significant opportunity.
If you look underneath the market a bit you can see that outright gamblers generate a lot of commission for Betfair and traders (before premium charge) don't. Therefore you can hypothesise that in fact a chunk of traders profits probably effectively come from Betfair's commission.
I think it's interesting to see the subtle shift, maybe it's my imagination, in how people approach Betfair. Maybe it's because Betfair tends to attract smart money rather than the casual money?
When I started people viewed Betfair as a great opportunity. With the book % so close to no over round people saw an opportunity to get an edge. But now people don't seem to view it with much relish. The dividing line between break even and a loss is so small I would have thought people would still view this as a significant opportunity.
If you look underneath the market a bit you can see that outright gamblers generate a lot of commission for Betfair and traders (before premium charge) don't. Therefore you can hypothesise that in fact a chunk of traders profits probably effectively come from Betfair's commission.
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CaerMyrddin
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That was an interesting point of view. Can't really defend it or deny it, but it's worth a thought.If you look underneath the market a bit you can see that outright gamblers generate a lot of commission for Betfair and traders (before premium charge) don't. Therefore you can hypothesise that in fact a chunk of traders profits probably effectively come from Betfair's commission.
Regarding who is using betfair, some friends of mine that are occasional punters find betfair much harder to use rather than let's say bwin. So I can only guess, on the overall betting industry how many straight bets does betfair get? And how many big bookmakers are offsetting their liabilities on betfair?
One thing they dislike about betfair is that comission is charged. You can argue that they can still make more money if their punt is a winner, but they don't like it and that's just it. I think it's a psychological issue.
If you look to the outstandig amounts bwin got on the WC, I think Betfair should have a more user friendly platform to the occasional punter. I know efforts have been done, but something very colourful with odds shown like (odd-1)*0,95+1 would keep punters with betfair. But that's marketeers bussiness, not traders
I think Betfair has failed to capture a lot of casual punters and it is a flaw in their model. The guy who wants to put £5 on England or, €5 on Portugal, isn't going to go through all the fuss and complexity to place a bet on Betfair. He will just find a place where he can put that bet on.
In my experience Betfair just seem a bit too far removed from people who want to offer solutions to address this niche. I don't want to go into the detail but it seems difficult to offer solutions to address this niche, which should be encouraged IMHO.
In my experience Betfair just seem a bit too far removed from people who want to offer solutions to address this niche. I don't want to go into the detail but it seems difficult to offer solutions to address this niche, which should be encouraged IMHO.
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CaerMyrddin
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Something easier to use like betfair.it should also be considerer. You should be able to chose the depth of options you have, anyway.
I think the drawback of that idea is that Betfair could be accused of encouraging corruption if they were to allow people to lay anonymously.
That said, you wouldn't need to be a criminal genius to create a Betfair account using a fictitious name!
Jeff
That said, you wouldn't need to be a criminal genius to create a Betfair account using a fictitious name!
Jeff
gutuami wrote:betfair should open shops like bookmakers and accept bets from "anywhere". That could be a move if they float...
Betfair have toyed with the idea (well a variation actually) of having 'terminals' in public places such as pubs, Airports, shopping centre etcgutuami wrote:betfair should open shops like bookmakers and accept bets from "anywhere". That could be a move if they float...
I think this will happen in the next few years..(great for us; more liquidity)..
regards
Peter
I believe mobile technology is the way forward for the casual punter, especially in football and nobody has got that right yet. I also think that educating the said punter in trading in football (laying off when your team score etc) will increase liquidity...
A lot of casual punters I know who watch live footy at grounds and in pubs, have a good understanding of the game inplay and a massive opinion.... two things which are necessary to trade inplay.
One other thing..... How come world cup games jumped upto 30 million in the Match Odds on betfair? Was this traders or more of the 2 million casual users who dont use their accounts very often?
regards
Herbie
Herbie
A lot of casual punters I know who watch live footy at grounds and in pubs, have a good understanding of the game inplay and a massive opinion.... two things which are necessary to trade inplay.
One other thing..... How come world cup games jumped upto 30 million in the Match Odds on betfair? Was this traders or more of the 2 million casual users who dont use their accounts very often?
regards
Herbie
Herbie