Liquidity taking strategies

[MacrcoPolo]

So because I'm curious, does anyone actually run any profitable strategies in these markets that exclusively take liquidity only? For those that aren't sure what I mean, I mean strategies where you never have an order waiting to be matched in the market, you are always trading immediately on the best prices available. I'd be curious to hear if this is possible, as the spread in these markets is really quite wide! (Granted the spreads are good compared to other sports, but compared to financial markets they are hideous)

[Euler]

You seem to be asking if it's OK to have a strategy that takes whatever price is available. Generally not, would be my answer as you are losing the spread between getting in and out and that will cost you probably more than your profit in the long term.

[MacrcoPolo]

You seem to be asking if it's OK to have a strategy that takes whatever price is available. Generally not, would be my answer as you are losing the spread between getting in and out and that will cost you probably more than your profit in the long term.

This is not what exactly what I'm asking.

Suppose you have some strategy based on some entry and exit requirements. My question is, does anyone actually make money in these markets (horse racing, pre-off) with a strategy based on some entry and exit if they are only prepared to take liquidity? I.e your strategy never has money unmatched in the market, you never wait to be matched, you just enter and exit as the strategy dictates directly against whatever money you can match right now.

EDIT: rereading it, it looks like you did answer my question, cheers. I'm going to leave this up here as a reminder to myself to read properly

[MacrcoPolo]

I think the takeaway here from your reply is that profit margins in these markets are thin (typically fractions of the spread)

[Kai]

I think the takeaway here from your reply is that profit margins in these markets are thin (typically fractions of the spread)

It's a very competitive market, no doubt. I think you received that answer based on how you formulated the question, your question implies that you may not have a big edge on this market so you are not advised to keep taking every price on offer because it will probably cancel out your profits and then some.

To shortly expand on that, sometimes you have no choice but to take prices on offer if you want to take advantage of fast developing opportunities or make a quick exit and so on. Obviously with a strong enough edge you can take prices on offer and not every tick is worth the same (compare 1.97 to 3.05). It would also depend on your approach, if you usually have one entry and exit then a tick may not be that big of a deal, but if you're making numerous entries then those lost ticks due to taking worse prices will soon add up against you.

[Kai]

(Granted the spreads are good compared to other sports, but compared to financial markets they are hideous)

Btw, I'm sure that some see this as an advantage instead of a hindrance, if you don't necessarily need to find a big move to produce a good result.

[MacrcoPolo]

(Granted the spreads are good compared to other sports, but compared to financial markets they are hideous)

Btw, I'm sure that some see this as an advantage instead of a hindrance, if you don't necessarily need to find a big move to produce a good result.

No doubt, it tells a lot though about the nature of how one should go about approaching these markets. I actually wonder what sort of returns on money matched are achievable pre-off over a large sample of races. Does anyone have any data on this or finger in the air estimates on what sort of return on money matched the most profitable regular (I.e trading >80% races) participant is making pre-off?

[Derek27]

(Granted the spreads are good compared to other sports, but compared to financial markets they are hideous)

Btw, I'm sure that some see this as an advantage instead of a hindrance, if you don't necessarily need to find a big move to produce a good result.

No doubt, it tells a lot though about the nature of how one should go about approaching these markets. I actually wonder what sort of returns on money matched are achievable pre-off over a large sample of races. Does anyone have any data on this or finger in the air estimates on what sort of return on money matched the most profitable regular (I.e trading >80% races) participant is making pre-off?

That would vary substantially depending on the skill and style of the trader. Scalping would return a small % profit whereas a trader who gets on steamers and drifters could potentially have a much higher return on turnover.

[MacrcoPolo]

That would vary substantially depending on the skill and style of the trader. Scalping would return a small % profit whereas a trader who gets on steamers and drifters could potentially have a much higher return on turnover.

Let's rephrase into something absolute:
1. How much are the largest traders (pre off only) by profit in the market earning?
2. What fraction of the volume does the highest turnover trader execute?

Guesses are welcome, plus I want to generate some discussion on the size of the opportunity in these markets. Plus some gossip about 'what people have heard'. I don't know any other sports traders personally, so appreciate some of this info is probably sensitive.

[ShaunWhite]

Does anyone have any data on this?

As Derek says this is entirely down to the approach and bears very little resemblance to profability. Some strategies turnover a large amount of money for a given return and others a small amount for the same return. Whereas one trader might hold a position for 5 mins another might have 100 transactions in the same time (and some will take and some will offer or a mixture of both). It's no different to any other market in that regard and it's like saying what's the usual return on turnover for an fx, equity or pork belly trader, there isn't one.

This most certainly isn't a one size fits all job and strategies are as varied as traders are. What you do and how you measure it is your decision.

[Kai]

That would vary substantially depending on the skill and style of the trader. Scalping would return a small % profit whereas a trader who gets on steamers and drifters could potentially have a much higher return on turnover.

Let's rephrase into something absolute:
1. How much are the largest traders (pre off only) by profit in the market earning?
2. What fraction of the volume does the highest turnover trader execute?

Guesses are welcome, plus I want to generate some discussion on the size of the opportunity in these markets. Plus some gossip about 'what people have heard'. I don't know any other sports traders personally, so appreciate some of this info is probably sensitive.

If you're asking how much money there is to be made in prerace markets then only you can answer that, for most people the answer would unfortunately be zero.

If you're looking to talk ballpark figures which is not an easy thing to do you can just look at some of the P&L's that get posted around, judging by those you can see a prerace trader can maybe on average make 500-1000 on an average day of racing, with any three figure result on a particular race being generally considered a good result. Some are happy to go above three figures a day period, while some are happy just to end the day in profit.

I sometimes hear this question from outsiders looking in, they want to know how much money there is here or there before dipping their toes in, because they have no idea since there is very little transparency overall and too much misinformation, but there are no absolute answers here.

Usually what little transparency you get is only from people that benefit from being transparent, if they have a business to run or such. But most traders are well aware of the size of these markets and the size of opportunity, no need for any guesses. I know it's difficult to know which sources you can trust but just try to use common sense, if someone is running a legitimate business then they should be a trustworthy source, and if someone is not then you are allowed to be sceptical.

Hope that helps.

[Derek27]

That would vary substantially depending on the skill and style of the trader. Scalping would return a small % profit whereas a trader who gets on steamers and drifters could potentially have a much higher return on turnover.

Let's rephrase into something absolute:
1. How much are the largest traders (pre off only) by profit in the market earning?
2. What fraction of the volume does the highest turnover trader execute?

Guesses are welcome, plus I want to generate some discussion on the size of the opportunity in these markets. Plus some gossip about 'what people have heard'. I don't know any other sports traders personally, so appreciate some of this info is probably sensitive.

I'll leave one of the big traders to answer that or post a P/L shot if he wants, but as a matter of interest, how would you find that information useful, or are you asking out of curiosity?

[ruthlessimon]

does anyone actually run any profitable strategies in these markets that exclusively take liquidity only?

Yes

Context & niche are really important though, as Euler will attest. Personally, if I'm going for a GB/IE swing & I'm filled easily - it's a dangerous sign. Generally speaking the best trades for me are when I take, then the tick instantly fills-up behind me.

I'd need more context TBH, but fast-moving markets were you 'know' direction it would make sense to jump in.

& as a side, like Kai mentioned - a strategy that is shown to work @ market is a powerful lil' edge

Obviously with a strong enough edge you can take prices on offer

[rik]

I think shouldn’t necessary focus on percentage edge, scalability often more important. If you had a bot that was scalping for a tick half the time, scratching 25% and losing a tick 25% of the time thats good if it works on many runners/markets/sports simultaneously and you can place decent amounts even though edge on turnover will be very low.
Percentage edge on total turnover will geberally be very low if you do mostly market making in liquid markets but i sometimes had 2,3,4 percent market share in big turnover markets so than even averaging 0.1% would be significant.