Bookmaking on Betfair: The Strategy Explained
Bookmaking was the very first Betfair strategy I learned.
It is is a very simple and ultra low-risk strategy which (as you'd expect) will not earn you massive profits individually, but the accumulation of winning trades can certainly help build your trading bank. It was instrumental in growing mine for a good 6-12 months when I first started.
Understanding the fundamental principles behind the 'book' is crucial to understanding how to 'make a book' successfully. This article takes a deep-dive into this beginner-friendly method for winning small but regular profits on the sports exchange.
Please note: If you are new to this stuff, please read my Betfair Trading Explainer article first.
What Is Bookmaking?
In the simplest possible terms, Bookmaking is the process of laying all outcomes on an event to lock in a guaranteed profit whatever happens.
Originally it could only be done by professional bookmakers in the high street and of course the dying breed of trackside bookies. But since betting exchanges arrived, it can now be used by anyone trading on sports betting markets.
This trading method can be used on any market in any sport. As a full-time football trader, I used it extensively on soccer matches but it could easily be applied to many other markets.
However I wouldn't try it on horse racing markets due to the multitude of possible outcomes (which would all have to be laid to complete a book). Tennis, boxing, even political markets can be perfectly suitable.
Please note that this is very much a pre-market trading strategy. Bookmaking can only be done before the event starts, or at least it should only be done before the event, never in-play !
Bookmaker Origins
Many years ago, if someone 'took bets' on an event, they would calculate the probabilities, as a percentage, of all possible outcomes. Then they would set the odds based on those calculations.
They would also keep a note of all the bets and relevant odds, which are actually the odds the 'bookmaker' laid at. By taking a back bet, you are laying the same thing, as it's the opposite bet.
That 'book' they kept was the root of the phrase 'keeping a book' or 'making a book', which led to the commonly used term of 'book-maker', and the huge industry which followed!
Probabilities
In a 'perfect market' (or 'perfect book'), the probabilities of all outcomes, when added together, should equal 100%. It's simple to understand why.
Tennis makes for a good example due to the simplicity of outcomes. If Federer is playing Nadal in the Wimbledon final, there are only two possible outcomes. Unlike football, there is no chance of a draw because tennis matches continue indefinitely until someone wins, in a final set tie-breaker if necessary.
With only two possible outcomes, we know with 100% certainty that one of those two outcomes will happen. If one doesn't, the other must. Thus the sum of the two probabilities must equal 100%.
If Nadal looks twice as likely to win as Federer (based on form, fitness, results etc), the bookie would set the odds on Nadal a lot shorter than Federer, to entice punters and gamblers to place bets with him.
If he priced Federer shorter than Nadal then a wave of backers would fight to the front of the queue to back Nadal at such big odds, far too big for his true ability and probability of winning the match.
Likewise nobody would be backing Federer at unrealistically short odds, as there's no 'value' there. Anyone making a book (whether that's you or Bet365!) must lay all outcomes, so he must take back bets on all outcomes. The price would need to be interesting enough to attract bets on all outcomes.
So in this case the bookie would set the odds roughly around the probabilities, and hope to take as many bets as possible on both players.
The problem with this scenario is there is no profit in doing so. The bookmaker will make nothing for all his effort, not even enough to pay for his notebook and pen, never mind feed his family!
But there is a solution to that problem. It's called the 'book percentage' or the 'overround'.
Overrounds and Underrounds
A book overround is the profit margin that has been factored into a market to allow the person making the book to make a profit from all the combined bets.
Why Do Overrounds Exist?
Many bookmakers throughout history have worked on massive overrounds, as that's their only source of profit. Well, that's if we don't count the hot chocolate machine in the corner of Ladbrokes offices where I spent many hours as a child! (Apologies again Mum, I still have the bruises!)
Many markets would (and still do) have an overround of 120% to 140%. This means the bookmaker is making 20-40% profit from that market. Not a bad deal really was it?!
Smaller Margins On Betfair
One of the reasons millions of gamblers flocked to Betfair (and some other betting exchanges) is because of the excellent prices. Most people know that, but many don't know why.
The reason is because Betfair was an exchange rather than a bookmaker. (Yes I know they now have a sportsbook as well but that's a recent addition.) Their primary business model was to make betting available between gamblers, rather than between gamblers and bookies.
Betfair provides the platform for sports fans to exchange bets with each other, and Betfair make their profits by taking a percentage from those millions of exchanges taking place every single day.
This means that Betfair don't make their profits from the book overround, and the fact that they don't have high street shops (it's all online) is another reason why their margins were smaller and those savings were passed on to the bettors with increasingly good prices. This has been a significant challenge to the traditional bookmaker industry and Betfair's profits grew rapidly as you'd expect.
This doesn't mean Betfair markets don't have an overround at all, they certainly do. But they are much smaller than those found in traditional betting shops.
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Example Of Overround
To give you an example, here's the Match Odds market for the World Cup football game between Spain and Costa Rica:
If you look just to the left of the blue "Back all" button, you'll see it says 100.4%. That's the overround in this market.
Actually, let's keep this technically accurate. 100.4% is actually the 'book percentage'. The overround is just the 0.4% element. And to be totally accurate I can tell you that it's actually not 0.4, it's 0.37, as a quick calculation confirms. (Betfair round to first decimal point).
What it means is that if you backed all three outcomes at the currently offered back prices (in blue), you would lose 0.4% of your total sum staked. In case that's a bit confusing, let's pretend we are stupid enough to do that!
I used a staking calculator to calculate what stakes to use. It's a simple calculation to do manually but there are websites you can use to do it for you.
My total stake is approximately £1000 (give or take), I chose that to show the percentages easily.
As the red figures on the left hand side show, I will make a net loss of around £4 whatever happens. Also note that £4 is (give or take) 0.4% of £1000. That's what that book percentage or 'overround' means.
Example of Underround
Ovverrounds relate to the back side of the book.
On Betfair (unlike in bookie's shops) there is another figure, over on the lay side. This is the Underround, which is basically the same thing but on the lay side of the book.
It means the very same thing but in relation to laying all outcomes rather than backing them.
Here's what it looks like if we try laying all outcomes at the offered lay prices (in pink):
The total sum staked (laid in this case) is again £1000. The figures show it will return a net loss of around £8, which is 0.8% of £1000. Look at that green box on the right hand side, and there you see it, 99.2% is the 'underround', meaning 0.8% is the net loss on stakes, if laying at all prices currently available for instant matching of bets (currently offered lay prices).
Keep An Eye On Book Percentages
In normal circumstances, the overround will always show a value above 100%, and the underround (lay side) will always show a value below 100%. If either of them go the other side of 100%, you have a situation which favours the bettor. Hence you don't see them very often (never say never!)
If that 100.4% overround figure shown on the above image became "99.4%", then you'd have a net profit by just backing at the offered prices. Likewise for the lay side, if that 99.2% turned into 100.8%, you could snatch an instant profit by laying all outcomes at offered (pink) prices.
But as I said, that rarely happens for more than a few seconds (sometimes a bit longer), as people quickly snap that up, or more likely, bots snap up any market errors or 'inefficiencies' like these.
Bots, or automated betting software programs, take care of all market inefficiencies in Betfair markets.
Betfair runs their own bots to 'hoover up' exposed prices and maintain market 'efficiency'. Some traders run their own betting bots as well to snatch quick opportunities like these. But that's of no interest to us.
Standard Bookmaking Strategy
As you may have worked out by now, successful bookmaking on Betfair, in its most traditional form at least, means laying all outcomes at the offered BACK prices.
These are a smidgen lower, and thus give us the book percentage we need to make those combined bets add up to an overall profit, rather than a loss.
So let's see how it looks if we lay at those (blue) prices:
Now that looks a bit better! Ok, I know what you're thinking, it's small, but....
- It's green rather than red!
- It's guaranteed green!
- This is a very small book overround, they are often bigger.
As you can see, a £1000 total stake returns 0.4%, or £4 (give or take). This was just to show you the mechanics of how this works and explain what the overround is, and what it means. There is more to the profit side of it, which I will cover below.
Advanced Bookmaking on Betfair
After many months glued to the trading screen, both bookmaking and scalping for many hours every day to build my bank, I developed the traditional bookmaking approach into something a lot more profitable, and enjoyable!
In short, this approach seeks to find the maximum possible book percentage we can get, and that's done by study of the market ladders before ordering the bets. It will be easier to explain by showing some example images which I still have from an old post on my Betfair trading blog...
Making A Book - Example Trade
One reason why Bet Angel Professional is (in my view) the best Betfair trading software is due to the bookmaking feature it has within it, which calculates the stakes for you 'on the fly' as you play around with the odds:
That image was taken from a video of a trade I made many years ago, I filmed it to help a relative learn how to use bookmaking to grow his bank while he learned some basic sports trading systems.
As you can see, it says the "Book %" is 105.5%. This is because I ticked the "Manual" column and used the arrows next to each odds price, to shift them down a tick or two. By doing that, I expand the size of the 'book' I am trying to make.
Bookmaking & Scalping - Hybrid Strategy
You won't always get all three matched at those prices, over time it became increasingly rare. That's why I adjusted my bookmaking strategy over time to make it a blend of bookmaking and scalping.
What I have actually done is looked at the range of prices that each outcome has traded at, and chosen the odds for my lay orders as low as possible but only at prices it has traded reasonable volume at. The reasoning being: If it has traded there before, it may well do so again.
In this case it looked like this:
2.48 is the lowest Huddersfield had traded at, 3.15 for Millwall, and the draw I chose 3.4 because experience taught me the draw price hardly moves at all and so I knew it was unlikely to go down to 3.35. I always gave the draw more chance of matching, as that's the order I found hardest to get matched before kick off.
Failed To Match All Orders? No Problem!
A fully successful bookmaking trade would see all three matched, but usually the two team's lay orders would get matched, as the markets shuffle up and down around 30-60 minutes pre-match.
Then I can either drag up the lay order on the draw, forcing it to match to 'complete the book', or more often I'd just turn the two already matched orders into small scalping type trades, placing a back order higher up on both and securing a small profit on each of those ladders. I'd obviously cancel the draw order if doing that.
Both team's lay orders matched but draw order unmatched and unlikely to as its price shifted up a tick:
Take profit on one:
Take profit on second:
Final result, two scalps:
The only thing left to do is to cancel the order on the draw (never ever forget to do that!) and then look for another market to trade.
Please note, this was shown as an example of the mechanics of this type of trading. It was not used to 'show off', and it wouldn't be as it was about the smallest profit I ever made in football pre-match markets!
Summary
Even with the fairly puny profits shown in the above trade, if you have a decent bank and the time to sit down for 10-30 minutes before a big game in which you have no other Betfair football methods in mind, why not make the time pay and add some pennies to the old bank?!
All in all I have extremely fond memories of bookmaking for hours every day!
I found the strategy racked up more than worthwhile profits, and much more quickly than you might think.
That's when I took the plunge and added thousands more to my bank to make that same 10-30 minute window frequently net me a nice £30-80, which isn't to be sniffed at especially for a beginner/intermediate trader looking for 'proof of concept' (not to mention more funds to trade other methods with)!
The hours I spent learning this (and using it) also taught me a massive amount about market dynamics, the maths behind betting exchange markets, and how prices move around in relationship to each other.
This was extremely valuable knowledge which I still rely on heavily to this day.
Bookmaking: Don't knock it 'til you've tried it!
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