BetAngel is a third-party Licensed Software Vendor of Betfair. BetAngel produce and support their own products. To make use of any of these software applications you must enter into an agreement with the individual vendors - separate from Betfair. Find off-the-shelf applications, historical data, results and more at the Betfair Solutions Directory.

Ever wondered how these guys with no interest in horse racing can make steady profits by trading? Cold traders read the market and profit from its trends rather than studying the form.

It enables you to place bets right up to the final whistle or until the winning horse passes the post - or even after that if it's a photo finish.

For the average punter this means a full range of odds are available to both back and lay and in sufficient volumes for the biggest gamblers.

By backing and laying several times as the price moved, I now have a profit on this horse of £24.55.

My potential loss is zero, I cannot lose on this race, it's a punter's nirvana; all I have is 100% upside. The £24.55 is now spare for me to do with as I wish. As things stand, I will win £24.55 if Hidden Jewel wins and if it does not win I will lose nothing.

If I wanted I could now oppose Hidden Jewel with no liability. This is because I already have 'free' money at my disposal on this horse and this would enable me to have a 'green' P&L, i.e. no losses meaning that whoever wins the race guarantees a profit. The image below shows what will happen if I lay Hidden Jewel at the price of 2 to balance up my book.

RacingTraders is a third-party Licensed Software Vendor of Betfair. RacingTraders produce and support their own products. To make use of any of these software applications you must enter into an agreement with the individual vendors - separate from Betfair. Find off-the-shelf applications, historical data, results and more at the Betfair Solutions Directory.

You must make sure that you match the timescale of your prediction of the price's movement with the amount of time you hold your position.

A classic mistake is trading on the favourite's price three minutes before the race and you see that the price is being backed heavily and is thus shortening (decreasing). You think that this horse has a really good chance of winning so in addition to trading you decide to back it.

WRONG!!! If you do that you are basing a short term trading decision on a long term view of the price. The timescale of your prediction of the price, i.e. that the price will go down because the horse will win the race, is different from the intended timescale of your trade.

You intended to make a profit in a minute or less. Now unless you're going to hold the bet until the race has finished then you can't base trading decisions on where you think the price will be when the race has finished.

2. Not getting out instantly

To avoid losses traders have to be extremely short term.

To trade without knowing anything about what is going on, you have to assume that any movement against you is going to carry on going against you in the most painful way it can. This isn't too drastic of an assumption, as anyone that's held onto a losing trade only to see it get worse and worse will agree.

Without any knowledge to the contrary you have to assume the worst, and the only protection against this is not to be in harm's way: The less time you're in a position, the less can go wrong.

Take your profits quickly and your scratch trades and losses even quicker. By quickly I mean instantly, profit scratch or loss you should be out, or at least have your counter trade in, within 10 or 20 seconds at the most.

3. Not doing scratch trades

The scratch trade is where you lay and back the selection at the same price.

There is a tendency amongst new traders to see the scratch trade as a waste of time. Once someone has made a scratch trade, only to then see the price move the right way they tend to stop doing them. The new trader can't get it out of his mind that the scratch trade just cost him a profit and stops doing them.

However, human nature will always make us dwell on what we just missed out on without appreciating what we've got. A scratch trade that gets you out of the market before the price suddenly turns against you is soon forgotten about as the trader quietly congratulates his trading skills and quickly forgets all about it.

A missed profit has a different effect on many people than a saved loss of the same size has. The fewer scratch trades you do the more losses you will have, that is a fact, so therefore you need more profits just to get back the extra that you're losing. It's far better to not lose and then to not win than it is to lose and then win.

To be a successful trader you must be taking profits and losses of roughly the same size, but having more profits than losses, the scratch trade taking the place of the losses.

As soon as you start to let your losses get bigger than your profits you're creating an uphill battle for yourself because then you need to have lots more profits than losses just to break even.

The absolute worst thing you can do is hold on to a trade because it went against you and let it ride as the race runs. Risking your whole bank because you couldn't accept a small one or two-tick loss is stupid. This is gambling at its worst. If you want to gamble then gamble but at least do it properly. Don't do a hybrid mix of trading and gambling where you're doing each one badly. You know that in the long run it's going to end in tears so why do it?

There's no point in winning nine times and losing once if your loss is 50 times the size of your profit. That instantly wipes out more than a whole day of successful trading. Anyone with such a complete lack of discipline not only will lose but deserves to lose.

5. Reading form and watching racing

As a short-term trader the last things you should do are read form and watch racing on television. This is for people who wish to gamble on the outcome of the race.

Not only are they distractions from trading but they implant biases in the trader's mind that detract from his ability to concentrate solely on the numbers and the patterns of movement they create. A trader shouldn't read the racing paper or switch on the television and should only log in to Betfair at the most 20 minutes before the first race.

6. Wanting to enjoy the racing

Trading is often described as boring and detracting from the enjoyment of racing. This may be the case but horse racing is of no concern to the trader so this comment is meaningless. Horse racing has nothing to do with what a trader is doing.

Wanting to enjoy the racing or enjoy your betting is fine but you cannot trade successfully at the same time. You can do one or the other but not both. Trading requires concentration and dedication and if you're watching horse racing at the same time then you are being unprofessional.

7. Over-thinking trades

Over-thinking trades has two drawbacks: firstly, cuts down their potential to make money by limiting the number of trades and secondly when the trigger is pulled they have put so much thought and effort into their trade that they fall in love with it. They are unwilling to get out of such a trade with an almost-instant scratch trade or an almost-instant small loss. This is why people ride their losses and end up gambling due to their inability to accept so quickly that they were wrong.

Instead of entering into a trade with the confidence that you are right, each trade should instead be entered with the assumption that you are wrong with a willingness to react correctly if indeed you are wrong. As much as you may have built up your reasoning for the trade you just did, you must remember that you don't actually know anything about what is going on and it's alright to be wrong.

If you wish to make money purely from trading, then it is worth every penny in subscribing to specialist software such as BetTrader PRO. They say necessity is the mother of invention and that's definitely the case with these products.

The Betfair interface has been developed to cater for many different types of customer. If you want to specialise in trading and especially scratch trading, then invest in a specialist product. Having live price feeds and one click bet submission at any price, lay or back, gives the trader the absolute flexibility he needs to turn on a sixpence which the Betfair website and most other trading applications don't allow. It's the old adage - you need to spend money to make money. Visit the Betfair Solutions Directory for further information on trading applications built by Betfair licensed software vendors. There are a variety of programmes available with a wide range of features, suitable for every type of trader.

9. Getting distracted

Don't check emails, answer the phone, use instant messenger, other websites or the Betfair forum while the racing is on, this includes the slack period between races when you have 'greened up your position'. That's the time where you can sit back for a few minutes while nothing much is happening and relax a bit, but you must still watch the price and be aware of what is happening.

It is very easy to get distracted and effect your trading. To really get in the groove you have to concentrate on every race, moving onto the next race when that one is due to start. Don't take your eyes from the screen except when nature calls. If you smoke then smoke in front of the computer or not at all, nipping out for a cigarette will cost you thousands of pounds over the course of a year.

The key is to concentrate for three and a half hours. You are a trader and nothing else, you'll be surprised how much better you trade when you don't allow any outside distractions of any kind, letting yourself be absorbed by what you are doing and really seeing the movements and imagining what they might do next.

10. Trading for a profit of a pre-determined size

Many people decide how much they want to make out of a trade before they enter it and then set their exit price according to that rather than what it looks like they can reasonably get now. Wanting to make two ticks is great but putting your counter-trade in two ticks higher than you just laid at is gambling, not trading.

It may go up but likewise could come in, if you can't get out straight away with a profit you should ask for a smaller profit. If you can't get the smaller profit straight away you should scratch, and if you miss the scratch trade you should take a small loss. If instead of all that you remain motionless with your counter-trade still in at the same price waiting for your two tick profit then you are gambling and will have your share of profits but also your share of big losses.

1.) Managing your bank......don't put all your eggs in one basket

There is no right or wrong staking plan when trading but once you have decided how much you want to deposit in your 'trading bank' limit, you need to decide the 'maximum loss' on a single trade. Many traders will not risk more than 5% or 10%. Also be careful not to chase your losses. Should you have two losing trades and lose 10% (5x2) of your bank do not double up. There may be three winning trades just around the corner. It is not a sprint but a marathon. Wait until you have a healthy profit before you change your rules. If you are losing, you must be doing something wrong and therefore should not be risking more. Even consider reducing your staking plan.

2.) Know your entry and exit.....and patience

A disciplined trader will choose his level, know his entry and exit...and he will stick to it. If it does not hit his level he will not make the trade. Chasing the market is a dangerous game. While it may not seem to be the case at the time there is always another trade. A trader is playing a percentage game that over time will deliver a profit because he makes more correct decisions than bad ones and has the discipline to exit losing positions as well as profitable ones. He will understand that he is not going to get it right every time but will be correct more times than he is wrong. His thought process may be 'I will take this position risking £1 to make £4'...a 4/1 chance (or 25%). This trader knows he only needs 1.01 successful trades in four under these rules to be profitable. This is the same psychology used by a bookmaker or casino owner. On a day to day basis they do not know if they will make money but over time they know, providing turnover is healthy, they will yield profits. When you have determined your levels, have confidence in your decisions and do not hesitate when placing the trade. Hesitancy will often leave you chasing the market and entering a trade at a worse level.

It is important to not only determine how much you hope to take out of the market if it is a profitable trade, but how much you would be prepared to lose should it go against you. Most traders can do the first part but when in a losing trade, they let it run and end up wiping out all of their profits! Also put your exit order in immediately and DO NOT move the goalposts! Below is a scenario which occurs if you do not do this.

You decide to back Man Utd against Arsenal at 2.8 with a view to trade out of it when the first goal goes in, green-booking for either a profit or a loss. Your analysis suggests if United go 1-0 up in the first half they would be trading at around 1.7. You do not put in your lay order. Rooney scores in the 30th minute. They are down to 1.67 but, having not pre-entered the order, you are mesmerized by the price continuing to shorten. You say to yourself '1.60 and I am out', then '1.50 and I will close my position'. You keep moving the goalposts only for Arsenal to score and you find yourself in a losing trade. There is no worse feeling. Good analysis but poor trading!

3.) Never expect the market to do what you want.....be happy when it does

A junior analyst for a leading global bank strode confidently into his CEO's office and announced to him that, having analysed all his charts, Pork Bellies were cheap and a short term futures trade; just below $80 would yield sizeable profits in the near time. "We should buy them when they hit $78", he said. The CEO asked him to sit down and for two hours they monitored the market. When it hit the level, the trader reiterated the 'gift' of a buying opportunity. "This is the short term bottom; we need to take a position". His boss picked up the phone and put in a large SELL order. The price continued to fall. The trader sitting across from him went ashen. "Your technical charts may help me on my decision making but never tell me what the market will do next".

You obviously need to have an opinion, based upon your analysis, but never be so arrogant to believe that you will be right and that you can predict the direction of a market. There are too many different market forces and participants to know what will happen next - someone may be forced to sell an open position because he has a margin call; another may be required to hedge a large position on another product.

Many traders believe because price movement on a chart is a replica of one they have seen before that they know where the next move is. They may well be right but because it happened before, it is not certain to happen again unless the market and participants are EXACTLY the same as on its last occurrence. This is highly unlikely!

Every trader has losing trades. It is those who can minimise their losses and choose the correct time to realise their profits who become good traders. Fear and greed have always moved markets. Have the belief in your decision making and don't be greedy, small profits time and again quickly add up. Keep the discipline, accept you will have losing trades and the moment you feel you are breaking your rules, walk away. There is always another race, another day and another trade.