The scratch trade is probably the single most important key to success in short term scalping of the UK horse racing markets on Betfair.
Being able to Lay and Back at the same price without loss, and without even having to pay commission on the round-turn, is such a benefit that it has to be used to the absolute maximum.
Anyone that learns how to use this powerful get out of jail free card to it’s full effect will make money as a scalper. A scratch trade is a winning trade because it will often get you out of the market before the price turns against you. A scratch trade may cost you some profits but it’s the losses that they save you that are important.
What is it?
The scratch trade is like a house edge that’s actually in your favour: using the bid and offer you can make a single tick profit if the market price doesn’t move at all, 2 ticks profit if the price goes in your direction, or you can break even if the price goes against you.
For example, the market is 2.34 bid and 2.36 offered and 2.36 is trading heavily and is about to go bid.
You snap up the remaining offers at 2.36 making the market go 2.36 bid and 2.38 offered. Others join the queue behind you wanting to Lay at 2.36 making 2.36 a stable bid and as the market continues to trade at 2.36 you get matched on your full amount while the market price remains at 2.36/2.38. You are now in a position to join the offer trying to Back at 2.38 and attempt to make an instant 1 tick profit without needing the market to go up. The price can remain at 2.36/2.38 and as long as both sides are trading you have a chance of making an instant profit without needing the market to move at all. If you believe that the price is going to continue rising you can put your Back offer in a tick higher at 2.40. Now you are only asking for a 1 tick movement higher to have the chance of making a 2 tick profit. And if the price doesn’t go up to 2.40 but instead actually goes down to 2.34/2.36 you can quickly try and Back your position at 2.36 to get out with no loss.
To summarise that trade, if the market stayed the same you could have made a profit if the market went up you would have made twice as big a profit, and if the market went down you had a good chance of breaking even.
With odds like that you can choose your trades by flicking a coin and still make money.
The skill is not in picking the direction of the market but in reacting to what the market does as soon as you have been filled. It about speed and reaction time.
The advantage of taking such small profits is not only the speed with which you can realise such small profits but also the fact that the bid and offer spread makes such a huge difference to your profits and losses. Couple that with being able to get it wrong but still not lose anything and you have the formula for being able to creep forwards slowly without needing to know anything at all about the horse that you are trading on.
With all the advantages that a short term trader has, such as the ability to hold back and pick his moments, all he needs to do is get only 50% of his trades producing a 1 tick profit, 30% of them breaking even and 20% of them taking a 1 tick loss. If you can do that you can be a full-time professional trader on Betfair, unaffected by all of the factors that full-time gamblers have to go through like losing runs, bad patches, bad luck, lack of confidence, chasing losses etc.
Scratch trades should be aggressively sought after by the short term trader. Far from being a waste of time or a missed opportunity for profit when the price goes your way just after you’ve got out, traders with the highest number of scratch trades are the most consistently profitable operators in any exchange environment because they are the least vulnerable to unexpected moves. They are not successful because they are always winning, but rather because they’re not losing.