Trading Strategies on Exchanges

## The Core Trading Concept Exchange trading means taking a position and then offsetting it during the event to lock in profit or limit loss, regardless of the final result. The exchange is the only environment where this is possible at scale. ## Strategy 1: Back-to-Lay Back a selection at a long price before an event. If the selection's implied probability increases (price shortens), lay at the shorter price to lock profit. **Example:** Back a horse at 8.00 for £50. During the race build-up, money comes in and the price drops to 5.00. Lay at 5.00 to lock profit: Lay stake = (Back stake × Back price) / Lay price = (£50 × 8.00) / 5.00 = £80 If horse wins: Back wins £350, Lay loses £320 → Net +£30 If horse loses: Back loses £50, Lay wins £80 → Net +£30 **Guaranteed profit: £30** (before commission) ## Strategy 2: Lay-to-Back Lay a selection at a short price (when you think it will drift out). If the price lengthens, back at the longer price to lock profit. ## Strategy 3: Scalping Place back and lay bets at adjacent prices in the order book, profiting from the spread. Requires very liquid markets (where the spread is small) and fast execution. Common in liquid horse racing markets in the minutes before a race. ## Strategy 4: Dutching Across Selections Back multiple selections in the same market at stakes calibrated to return the same profit regardless of which one wins. Requires the combined implied probability to be below 100% (i.e. a positive dutch). ## The Role of Green Book Technology Betfair's interface shows a "green book" view — the net P&L for every outcome if you were to close the trade now. Learning to read the green book fluently is essential for exchange traders.