Technical analysis is popular in financial markets like the stock market.
Since Betfair is a betting exchange and odds fluctuate like stock prices, one could say that technical analysis may also be applied to the Betfair betting charts.
Sports trading has quite a few differences compared to stock or forex trading. But basic technical analysis tools should work just the same.
Still, many Betfair traders continue to doubt the effectiveness of support and resistance levels or reversal patterns and dismiss technical analysis.
Are you one of them?
Betfair traders doubtful over technical analysis
A large proportion of my blog’s traffic seems to be coming from forums or websites discussing Belfair trading and technical analysis in particular. They are usually internet places where Betfair traders discuss their own strategies. More often than not, the original poster wonders whether a Betfair trader could apply technical indicators and tools on Betfair charts profitably.
My trading blog gets mentioned somewhere along the discussion taking place but the replies that follow are almost all pessimistic about technical analysis’ profitability and capability in correct predictions.
So it was about time I shared my own view about the subject.
What I think about technical analysis
Obviously I think technical analysis works in Betfair trading.
Why?
Well, if I get asked whether technical analysis works in stock trading, what would I respond? Of course, it works there as well.
Again, why?
Odds and stock prices move due to news, facts, financial or betting data, and certainly due to the crowd’s psychology.
If we see a declining trend line in a horse’s Betfair chart, we are certain that something influenced the crowd to bet a lot of money on that horse. We may not know what triggered those bets, but whatever it was, it surely led the odds to shorten.
Surely, the indicators don’t always work.
We may enter the market at the end of a rally, or open a trade at a false reversal point. A loss is almost certain in both situations and sequential losses will make the trader’s mind lose focus and will result in loss of confidence.
The trader will stop trusting technical analysis and try to find other profitable ways to make money in Betfair markets. But we all know everything I already said. How come I believe technical analysis works in betting markets?
Technical analysis is just a tool
Technical analysis is a way of predicting the odds movement.
Sometimes it will predict correctly, sometimes it will make a mistake. False predictions are expected! Technical analysis, like EVERY OTHER prediction method, has its percentage of success.
If it could predict whether the odds will climb or fall 100% of the time, it would be the Holy Grail, the Golden Goose, and so on.
There is no such thing.
It is just one of many methods of odds or price prediction. A trader could also predict an odds movement by looking at the weather. If it was sunny, he would start by laying, predicting a drift. If it was rainy he would expect a price drop.
Does that make sense?
I'm sure their method would raise eyebrows, and more traders would question it. However, if their method succeeds more than 50%, why blame them? They're making money, for crying out loud!
Keep technical analysis simple!
Regarding technical analysis, many posters claim that support and resistance lines don’t work in Betfair charts. Betting markets don’t behave like the financial markets so we can’t use the same tools.
I agree with them that Betfair charts don’t provide enough data or are easy to plot many indicators on (maybe TradingView should step in?). However basic elements of technical analysis like support and resistance lines or trend lines can be drawn.
Now, how effective are they? It really depends on the trading strategy.
If a trader trades for a couple of ticks, he might get outplayed by 'trading noise'; small random odds movement which will lead to closing his trading position early.
If, on the other hand, he is willing to risk 10 ticks to win 2 when the odds line reaches a major support or resistance level, he will have a lot of small winning trades and a few big losing ones. However, if he succeeds in winning trades more than 85% of the time, he will make a profit in the long run.
8.5 times out of ten, they will make 2 ticks (17 ticks), 1.5 times they will lose 10 ticks (15 ticks). In the end they will be making 0.2 ticks per trade in the long run. Cha-ching!
Every analysis is different
Does technical analysis work for another trader that uses the same support and resistance levels but applies a different approach. Perhaps they use candlesticks and risk 5 ticks in order to win 3 with 60% probability?
No, it doesn’t because 6 times they will make 3 ticks (18 ticks), 4 times they will lose 5 ticks (20 ticks). They will be losing 0.2 ticks per trade, thus they will never look to technical analysis again.
It’s not the analysis that has flaws though, it’s the trading system itself.
Technical analysis provides us with the tools. It’s up to us to make them work and make money out of them.
By studying a little about technical analysis, we will get quickly familiar with trend lines, reversal, and continuation pattern formations.
The next step is identifying them on the real Betfair charts, which again is not that difficult. But then comes the most challenging aspect of applying technical analysis to Betfair betting charts: analyzing the success percentages, winrates, and probability odds of different trading systems until we figure out the profitable trading strategy. 🤯
Oh, of course, there is one final step. Proper money management and being disciplined enough to follow our trading system’s rules. 🙂
