Be Cautious When Using Starting Price Bets

Developing strategies that make use of the Starting Price of a betting exchange market have some nice properties such as simple backtesting but there are also risks associated with it.

Placing bets at starting price

Several Betting Exchange markets offer Starting Price bets: It means that you can place an order prior to the start of an event. Once the market turns inplay, the starting price is calculated and bets are matched accordingly. Following the efficient-market hypothesis the starting price represents the probability of a selection to win at the beginning of the event. Some exchange markets also offer the option to add a limit on the starting price so that back or lay bets are only matched above or below a certain threshold.

Advantages of Using Starting Price Bets

When developing a strategy the starting price might be a suitable benchmark to backtest and evaluate your strategy. It is relatively simple to import or record starting prices into your master database for backtesting. Placing a starting price bet via API is also very simple: Once the starting price bet is placed via API, it typically just gets matched or voided if odds limits are not met.

Betting Systems that solely make use of the starting price are simpler to deploy than trading strategies: You only place on bet and don't need to worry about market fluctuations in price, greening, etc.

Risks when Betting at Starting Price

However, there are also disadvantages and risks associated to starting price betting.

Starting Price Adjustments due to Non-Runners

When you backtest a system based on the starting price you always have the "true" starting price available. However, when you then use an odds limit there might be some deviation from your backtest. This might happen when there is a non-runner in the market which leads to a change of the specified limit based on a correction factor. Details on this process can be found in the rules of your betting exchange market.

Unmatched Starting Price Bets

When you read through the terms of bookmakers or betting exchanges you will typically find that a match is not guaranteed when placing a starting price bet. This typically happens for extreme odds such as 1.01 or 1000. However, we also had instances where starting price bets were placed on the back side with an odds limit. The starting price was below the limit but still not matched. On the long term this might happen in your favor (avoid losses) or against your favor (miss a win) and you would expect that effects are balanced.

SP Bets Revealing Your Strategy

When you place starting price bets with very specific odds limits, with characteristic stakes or always at the same time offset prior to the race, there might be the option for other market participants to reverse engineer your strategy.

Let's suppose you have developed a system that has an edge and you place back bets at starting price with an odds filter of 23.0 with a stake of 9.00 GBP exactly 17 minutes before the off through a betting bot. Someone with access to the market might be able to spot the pattern, copy your strategy and your edge might be gone. We have written another article on how we reverse engineered a betting strategy based on starting price bets.

What are Alternatives to Starting Price Bets?

Instead of using staring price bets you might just place regular orders via API just before the beginning of the event. You can even randomly split your stake and place them at random times before the off to mask your strategy. This might be helpful especially in markets with low liquidity.

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