What is my betting strategy?
In summary, I intend to pursue a low risk, low return betting strategy. Obviously, depending on the type of trading and gambling that I am undertaking, the risk and returns may vary a great deal.
In this 12 month experiment, I intend to concentrate my efforts on Trading and Gambling on Betfair. At first, I will only specialise in horse-racing but over time, I would look to diversify into other sports.
The main attraction of Betfair trading is the ability to generate a profit regardless of the outcome of an event. This is possible through the use of arbitrage and hedging.
Arbitrage is a concept that is well known in the stock market and involves buying shares at a lower price and selling them at a higher price. In Betfair terms, arbitrage means "Back High and Lay Low". It doesn't matter which one you do first. In simple terms, you put money on a horse to win at high odds and then lay the horse to lose at lower odds.
Once you have created an arbitrage situation, you will effectively have created a risk-free bet for yourself. In order to benefit from this risk-free bet, you would still require the bet to win.
Hedging allows you to exploit the arbitrage situation by generating a profit regardless of whether the bet wins or loses. Hedging means that you would lay off the arbitrage profit so that you are in the same financial position whether the bet wins or loses.
Clearly, trading sounds very simple in the sense that you back at high odds and lay at lower odds. The difficulty lies with the fact that it is difficult to find bets where you know the odds will change in the direction that you predict.
Trading tends to be very low risk and will therefore only generate low returns. However, it is possible to trade on every horse race or sporting event quite effectively, so the small returns generated will soon build up.
One of the main attractions of gambling on Betfair instead of with a regular bookmaker (e.g. Ladbrokes) is that the odds offered on Betfair will generally be more favourable to the punter even allowing for the commission deduction. The reason for this is again fairly simple. Odds offered by traditional bookmakers have an element of profit margin included in the odds in order for the bookmaker to make a sufficient return. Betfair odds effectively have no profit margin included although you need to bear in mind that commission deductions need to be taken into account when comparing odds between Betfair and traditional bookmakers.
To exploit the better odds offered on Betfair, I am going to use a betting technique called Dutching throughout the course of The Experiment. Dutching involves backing more than one selection in any event in order to generate the same amount of profit regardless of which selection wins.
The main reason for using Dutching is that it allows you to generate a very high strike rate of winners. Obviously, the odds that you are backing at using Dutching will be much reduced as you are backing a number of selections in an event but the key thing is that you will be able to have a very high strike rate of winners.
Anyone who can guarantee a high strike rate of winners should be able to make money from gambling by using an appropriate staking plan in order to exploit the high strike rate.
I believe that using a Dutching technique with my intended staking plan should generate moderate returns for a moderate amount of risk.
Overall, by using both of the strategies above, I hope to be able to carry-out a betting strategy that carries little risk but will provide steady small returns. Importantly, Trading and Dutching can be used on any horse race and any sporting event. Therefore, the more events I bet on, the greater the monetary benefit that I should experience (if all goes to plan!).