Weight of Money Betting Exchange Strategy

Wednesday, March 14th, 2012
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Weight of Money is a feature that exists on Betfair and all other bookmakers that allow punters to ‘Lay’ or ‘Back’ an event. It is used as an indication of a short term price movement trend. As you should know by now, ‘laying’ involves betting on something that you dont think will happen. For example, horse A is 4.00 to win the race. You can ‘lay’ that horse for £10, probably in or around the 4.00 mark also. The risk is that you will owe £30 if the horse actually wins the race. On sites that allow punters to lay bets, Weight of Money plays a major role. In essence, if a large proportion of money is placed on a ‘lay’ bet, the odds of that event occurring will shorten. So if enough punters ‘lay’ horse A at 4.00, rest assured that the odds of this event occurring will shorten as the Weight of Money takes its toll. The point of Weight of Money is to get the market moving smoothly in the direction you want it to go.

Betting Exchange Strategy

Betting exchanges like Betfair offer Weight of Money trading to give a better idea of who the winner of a race will be.

Weight of Money Betting Exchange Strategy : Example

If there is £5000 on the back side and £10,000 on the lay side the weight of money will have a 33% advantage on the lay side. Assuming that both back and lay money is arriving into the market at the same time (theoretically), we can also assume that the back money will disappear first (because there is less of it). Therefore the price will become smaller (shorten). If the reverse occurred then the price would increase (drift).

Is It Important?

Weight of Money trading does not always work but it is an essential part of Betfair and similar sites. For example, if 1,000 punters backed horse A and only 5 punter ‘lay’ horse A, the odds of horse A winning the race will continue to drop as punters accept the price. As Betfair in particularly operates so quickly, your bet may not get matched and you continue to miss out as the prices get lower and lower.

In theory, Weight of Money trading should give you a clear picture of the eventual winner of a race. If horse A’s back price is dropping fast, perhaps this means connections are giving an indication of inside knowledge (or similar advantage). Therefore, it makes little sense to lay it unless the odds of it not winning are below its true chance of winning (True win probability – perceived win probability=value). However, there are a number of reasons why Weight of Money trading can not be accepted at face value.

Spoof Trading

There are individuals on Betfair and similar sites who deliberately manipulate the market with fake orders. For instance, a punter may place a large back bet on a horse at 4.50 when the current odds of it winning are only 2.00. The odds are so far apart that it’s unlikely the order will ever be filled. This of course is done on purpose. The manipulator does not want his order to be filled. Normally this tactic is seen when a punter places a large order 2 or 3 ticks above the current market price. He merely wants traders to follow his lead and cause the price to shift. The Weight of Money placed on the bets could cause this to happen. Suddenly, the manipulator pulls his fake order and places a wager on his real target once the market price has been pulled in a direction favourable to him. This can cause havoc and lure inexperienced punters into a trap where they chase a bet at what turns out to be poor odds.

Speed

Another big problem with Weight of Money trading is that the amount of money placed on the average UK horse race is quite incredible. In seconds, you may see thousands of pounds being wagered on any give horse race. This would be fine if it was all in one direction but it isn’t. Some punters make their living by exclusively ‘laying’ horses while others stick to straight backing. Money will flow in from both sides which makes it hard to decide what side of the market you need to trade in to make a profit.

Weight of Money trading is therefore a risky proposition because you could end up quite literally backing the wrong horse. Professional traders may risk thousands of pounds on a single race but a mistake on their part could lead to crippling losses. At the end of the day, don’t place large amounts on either ‘back’ or ‘lay’ unless you are willing to see your wager met.

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