Monday, Oct. 20, 2014

Weight Of Money On Betting Exchanges

Betting Exchange TutorialAt Bet Exchange Traders we have always tried to fast track people to success and talking about and explaining how WOM works is part of that process.

Recently traders have been contacting me because they have either heard that WOM is dead or that it no longer works!! Couple with this I have seen many articles recently about the death of WOM.  So whats my opinion on this?

My view point on this question is two fold. First choose an event type and then consider the difference between in-play and pre-event trading.

Event Type

Most people get involved in a horse race about 10 minutes before the off and stop shortly before the off itself. As I explained in an earlier article called Multi Tasking you always need to remember the type of event it is you are trading and whether or not the event can go into suspension and why.

Horse Racing

When we consider a horse race, we need to remember that the race will go into suspension on the start of the race itself. Once a race is switched in- running, it will go into suspension when the race actually finishes and the first horse goes past the post.

If we now consider pre-race trading, we need to understand that it can take place in the knowledge that trading will be halted/suspended on the off and for no other reason, and further that the off is a timed event, known in advance by all traders.


As a contrast to Horse racing consider Football, pre match Football behaves in exactly the same way as Horse Racing, in that the game is suspended on kick-off. However when the game is turned in-play things start to get interesting, and we have a difference.

In-play football matches will be suspended when a goal is scored and the scoring of gaols as we well know and understand is neither pre-determined nor a timed event. A goal can happen at anytime within the 90 minutes of the match. Remember that in horse racing the race will only be suspended when the first horse passes the post.

Multi Tasking

Coupled with the above  we also need to relate things to the Mutli Tasking article and remember that when we are not in running prices themselves are not subject to any natural wastage/reduction due to the likelihood of the event we are backing/laying happening or not happening. Remember the article about the Football field being next to Wall Street and the decaying time premium?

Timed Event

To recap, this Football Field article. When article - when we are in play or in running we are in a timed event, during the event itself prices will change according to the likely hood of the event you have backed or layed actually happening. As well as a goal.

Imagine Man United are leading Birmingham 1-0 in a football match, as the clock ticks round to 90 minutes the price for United to win so a straight BACK play will shorten. Conversely the Draw and the Birmingham win will lengthen.  Lets say we have 20 mins to go in the match and United are at 1.35 to BACK. As you watch this happen the WOM will be working just fine, balanced heavily one way as the price drift inexorably towards 1.0 in our united Back example.

WOM spoofing

Given the above, lets ask ourselves a question. As pro traders where would we be prepared to do a bit of spoofing a a bit of scaring away less experienced traders resulting in the transfer of money from them to us ? Answer A:  In the relative calm of the pre match activity where no match or race suspension can cause us unexpected grief or Answer B: During the in-play session when a goal could scupper us?? Think about it.

Traders should be aware that other professional traders who know that the WOM is one of the favourite tools of other traders will be prepared to try and spoof weaker traders into making errors and catch them out, so that they can relieve them of their money. They can do this in perfect calm and harmony in the pre match session or the pre race session knowing that the only thing that can trip them up is their misreading of the market. The lack of a suspended market gives the pros a clear playing field.

The way it works is like this, because the field is clear the pros can load up a market one way or another with money they never actually intend to trade, this happens all the time, it spoofs other traders into thinking the market will go one way, and when the pro spoof money is actually removed from the market and cancelled the market moves in the other direction Result inexperienced traders loses money. This happens all the time and happens all the time in financial markets as well.

WOM which works

What to do. If anything was 100% sure the markets would not exist, so do not expect that WOM or anything else will work 100% of the time, be ready to take a loser and cut your losses short when this happens.. Be aware that pre race this WOM spoofing can happen and does happen. I will repeat again the logic is that money can be put up on either the BACK or LAY side which is money that will never get traded; it is merely cancelled when the trader feels like cancelling. To get round the issue, normally if there is enough money built on one side then WOM will work fine.

WOM In-Play

Remember the Man U example above well if we look at that again and consider Man U were 1-0 up at a price of 1.35 with 20 minutes to go in the game you will see the BACK price dropping sharply. This follows the logic of my earlier my explanation.  At this point you will see the WOM in action and working superbly. In order for the price to physically drop from 1.35 to 1.0 there must be more people wanting to BACK than LAY, and if you look at the standard software packages available which measure this, you will see this actually happening in real time.

The reason why WOM works so well in-play is that firstly we are in a timed event and we get the decay in the actual price itself and secondly we have an absence of pros who are prepared to try their hand and spoof the smaller guys. They are absent because a sudden goal could cause them huge losses so they stay away. Imagine putting up 10k about United and then Birmingham draw level. No pro will expose his account to that risk if he doesnt actually intend to take the trade.

So to those who say WOM is dead, no its alive and kicking, just be careful of the Spoofers in the pre-race horse racing action.