How I know that the betting markets are inefficient
As a professional gambler and seasoned Betfair trader, Monday is one of the most critical days of my week. But it’s got nothing to do with the sport that is on, It’s about starting a fresh week and meticulously reviewing my past performance and strategising for the future. Here’s a detailed insight into how I approach my Mondays.
Is the betting market efficient?
You’ve likely heard that betting and financial markets are often described as efficient, and while that sounds convincing, my experience tells a different story. Over the past 20 years, I’ve been deeply involved in these markets, and I’ve put significant amounts of my own money on the line to prove that they don’t always work as efficiently as people believe.
When I started with modest £100 stakes, I had no idea it would grow into something much more substantial. But I wasn’t just in it for a quick win—I was determined to prove my approach worked consistently over the long term. Anyone can have a good run for a week or a month, but sustaining success over two decades is a different matter altogether.
After 20 years of betting and trading, I’m confident that the markets aren’t as efficient as many think. My journey has shown that with the right approach, you can consistently find opportunities where others see none.
Thank you, Mr Buffett & Munger
I think most people often get the feeling that something isn’t quite right with the world.
My first inkling that I was on the right track was when I invested in Berkshire Hathaway and started listening to the musings of Munger and Buffett. They would often talk about how human nature was one of the reasons for their astonishing success and how behaviour, especially under uncertainty and stress leads to mistakes.
It would take years before I truly understood this.
Value betting and efficient markets
I began my journey in value betting and arbing, exploiting price differences between bookmakers and betting exchanges. As I delved deeper, I developed models to test market efficiency across various sports, starting with football.
When I turned my attention to racing markets, I noticed something curious. The market seemed both efficient and inefficient at the same time. I recall a two-runner group race at Goodwood where both horses, equally rated and initially priced the same, suddenly saw their odds diverge dramatically without any apparent reason.
It became clear that such rapid price shifts couldn’t be justified by new information or changes in the horses’ chances. The market was efficient overall—one horse would win, the other would lose—but individually, the pricing was flawed.
Interestingly, the horse with the drifting odds ended up winning.
Trading and efficient markets – String theory
Trading markets are often seen as efficient, reflecting the value of all available information at any given moment. While this is broadly true, it doesn’t fully capture how profits are made in trading.
Think of the market like a piece of string. In theory, it should stretch smoothly from start to finish, becoming more efficient as new information is factored in. But in reality, the string is tangled, meandering unpredictably due to opinions, emotions, and other chaotic factors.
The gap between the ideal ‘efficient’ string and the tangled reality is where trading profits are found. You profit not from efficiency, but from navigating the uncertainty.
So that’s the theory, what’s the reality?
It’s easy to find flaws in my brief observations—years of experience can’t be fully captured in a few sentences. You might spot gaps or argue specific points, but one fact stands unchallenged: consistency.
Beating the market for a year could be luck, and even a few years might be chance. But after over two decades, my results speak for themselves.
My limits are set by the scale of the markets and the opportunities they offer—factors beyond my control—but the opportunities remain constant.
Human arbitrage
Things aren’t as simple as they seem—if they were, everyone would rush in to correct inefficiencies. Yet, over the past 20 years, I’ve watched people repeatedly fail or make the same mistakes. This led me to seek out the reasons why, and the answers I found were rooted in psychology.
People view the world through their own filters, often sticking to conclusions that fit their beliefs, even when faced with contradicting evidence. This insight into cognitive biases helped me understand the puzzles I saw in the market. These biases aren’t just present in trading—they’re everywhere, from everyday life to sports.
To succeed, you need a balance of intellectual and emotional intelligence. Too much of either, and biases take over. I’ve faced a lot of skepticism in my field, but just because something isn’t immediately understood doesn’t mean it isn’t worth learning about.
In an industry notorious for bad behaviour, it’s no surprise that people often miss the point. But differences of opinion make a market, and those biases create opportunities.
After twenty years, I sometimes dread the day when everyone catches on—but I’m starting to think that day might never come. Maybe I’m really onto something here!
Putting it all together
I’ve settled into a pattern of not only figuring out what the market price should be but also predicting how the market will react. It’s a game I truly enjoy.
I’ve tried to share this knowledge through blog posts and videos, offering a general guide on what you should aim for. But everyone sees things differently, with unique approaches and abilities—that’s what makes a market. I know people will pick holes in it; that’s just human nature.
Most of the market isn’t doing anything particularly clever, so if you can nudge things slightly in your favour, you can gain an edge over the majority. This approach has worked for me for two decades and continued to do so last year and will do so again this year.
Of course, results fluctuate with the opportunities, and there are good and bad moments. But understanding my methodology is key to seeing how I achieve consistent success.
The future
Despite my efforts, I’m not immune to market changes, whether in participants or structure. That’s why I’m constantly tweaking strategies, approaches, and market assessments. Over time, I’ve lost the fear of losing my edge because I understand why these edges exist and how to adapt when things shift.
What I can’t control are the industry and external factors. Structural changes or market declines could impact my work, but I don’t waste energy worrying about what I can’t influence.
One key trait I’ve developed is always being on the lookout for new opportunities—they’re everywhere. No matter what happens in the markets or the industry, I’m always focused on moving forward.
That’s why I start each year with renewed optimism. Who knows what I’ll discover in the coming year? All I know is that it will be something I haven’t even thought of yet!
But my key message here is, the market isn’t efficient, it can’t be. Either that or I’m in an amazing dream and I’m about to wake up.
And on that note, remember that while some people dream of worthy accomplishments, others stay awake and do them!