Research, Liquidity, and Capital for Betting Exchange Trading
Summary
The discussion addresses how to approach trading on betting exchanges, including sport selection, research effort, bankroll, and exchange fees. Its main strategic point is that high liquidity can make prices more efficient: odds may adjust quickly to reflect estimated outcome probabilities, leaving less opportunity for a trader who seeks to predict price movements. The answer therefore points toward researching less liquid sports and examining whether a specific predictive strategy has evidence behind it.
It distinguishes capital needs by trading style. A price-prediction strategy needs enough funding relative to its variance, while market making in illiquid markets may require substantially more capital to support positions. The answer also flags commission and premium charges as relevant operating costs and mentions an exchange with a stated commission structure. The response offers general guidance and research references, not a tested sport ranking, bankroll formula, or demonstrated path to consistent income; the suggested MMA examples may not transfer directly to other sports.
Key ideas
- High liquidity can coincide with faster price correction and fewer opportunities to predict odds movements.
- Research should focus on a concrete strategy and assess its evidence rather than assume a sport is profitable to trade.
- Capital needs depend on strategy variance and whether the trader predicts prices or makes markets.
- Exchange commissions and premium charges should be included when assessing a strategy’s net results.
- The discussion does not establish a reliable income target or a universal bankroll requirement.
Tags
Full text
# Which sports are generally the best for trading on betting exchanges for a profit? # Which sports are generally the best for trading on betting exchanges for a profit? I am looking at trading bets on tennis, football and horse racing in particular as these appear to have the most liquidity. How much background research and how much trial and error is generally needed to trade confidently with some knowledge of how the prices will move? Also how big of a bankroll do you suggest starting with? The exchanges I am looking into currently are www.Betfair.com and www.WBX.com, however I have read that Betfair has a 60% premium charge for long term winning accounts, does this generally affect traders if dealing with multiple trades daily? I am hoping to get it to a level where I make a consistent ~£100-200/daily profit to supplement my income and continue to work my way up from there. Any advice is truly appreciated, thank you in advance! ## Answer by Emir (score 2, accepted) https://quant.stackexchange.com/a/16386 Have a read of the paper posted here: http://prescientmuse.blogspot.co.uk/2015/01/mixed-martial-arts-fight-outcome.html It pertains to MMA but expounds on research method and what a profitable strategy may look like. I wouldn't suggest liquid sports at all. Liquidity will imply often imply prices which correct quickly to represent the best guess at the underlying probability. Also have a look here: http://prescientmuse.blogspot.co.uk/2015/01/assumptions-to-avoid-when-predicting-mma.html Again, it pertains to MMA but most of the advice is generally applicable. If you're predicting price movements then you need only so much capital as to cover some multiple of the variance of your strategy. I you're intending to be a market maker on illiquid sports then you need a lot more capital. As far as exchanges go, also have a look at smarkets.com which do not have a premium fee and charge 2% commission.
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