Order-Flow and Momentum Trading for a Profit

We’ve teamed up with one of the world’s leading educational Betfair traders, Caan Berry, to provide you with a comprehensive how-to guide on Momentum Trading.

For more on Caan Berry, check out his website HERE.

Take your new-found trading skills on the Betfair Exchange.


Order-flow

Order-flow is one of the most reliable market indicators for professionals on Betfair’s Exchange.

As the saying goes; “the numbers never lie”.

Better still, it’s possible to exploit and profit from the Exchange markets without having any knowledge of the sport you’re trading. This is why order-flow or sentiment trading is sometimes referred to as trading cold.


Interpreting the flow of money

On Betfair’s Exchange, price is dictated by supply and demand.

If more back bets flow into the market, the price will shorten. On the other hand, if there is more lay money available, the price will increase.

Momentum traders focus on these market forces to identify profitable trading setups.

Essentially they are looking for a 50/50 risk to reward ratio once ‘momentum’ is already in full flow. Like surfing a wave, there needs to be enough action to make it a ride, but you don’t want to get on late.

This analogy highlights the trickiest element of order-flow trading – timing.


Spotting momentum early

There’s a big advantage to being first, but how do you pinpoint early money?

To answer this, there are 3 main areas of focus:

  • When is genuine market activity likely to pick up?
  • Where is disproportionate betting volume likely to go?
  • How can you measure the market change in real-time?

If you’re looking for momentum, you need activity, so it’s a logical place to start. Also, large gambles are often waged when the market is at its strongest – close to the start. So, targeting periods of peak activity is wise. You can view historic price activity via the Betfair Exchange charts.

Next, you need to look for a reason that makes increased volume likely. Like when a greyhound hasn’t run for a long time, or if a horse comes from a ‘gambling yard’.

Finally, you need to be able to keep track of what’s happening. I’m not talking about opinion here though, I’m talking about watching the betting volumes in the moment, responding to momentum and change as it happens…


Visual shortcuts for traders

If you’re using one of Betfair’s trading apps, there are some additional prompts that help locate current momentum.

As shown in the Geeks Toy software below, they offer added functionality that will allow you to differentiate between recent and previously matched volumes.

Dark green bars display matched volume within a pre-defined setting (40 seconds in this example). Light green bars show the total volume at that price.

So for example, at a price of 7.4, there has been a total of $2,200 matched in the last 40 seconds. Whereas, the $3,900 matched at 7.6 was outside the last 40 seconds.

This visual is extremely helpful when trading short-term. Identifying and reacting to changes in volume quickly. In some instances, it’s the difference between winning and losing.

If you’re not familiar with trading software there’s a full article here.


Overlooked influences on momentum

Although I wish it was, identifying betting volume isn’t the only factor to consider. You have to be aware of activity elsewhere, in the same market. The reason for this is simple.

Any betting market’s odds are a reflection of probability. Thus, if one price decreases, something else in the same market has to increase. Choosing a trade on just one outcome’s betting volume would be foolish. Most new traders overlook this. Ideally, you want to identify a potential gamble unfolding in a betting market where nothing else is being backed.

You should also remember, you are not the only user attempting to trade momentum. It’s frequently overlooked but glaringly obvious once you’re aware. Other momentum traders are prone to placing large unmatched bets in the market, to influence other Exchange user’s opinion. Known as ‘spoofing momentum’.

In some situations ‘spoofers’ able to stall or speed up price action. It’s a dangerous game to play as they get caught-out when bets they don’t want are matched. The key is to be aware in the first place as it will save you getting caught out!


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