How to Scalp: Learning the Scratch Trade
By Adam Todd
Scratching trades may end up costing you a few profits but it will also save you lots of losses. Many people dwell on the times when they scratch and, as soon as they did so, the trade went in the right direction and they could have made a few ticks profit if only they hadn’t scratched so quickly.
As a result they stop doing quick scratch trades. Missing that profit causes them to either forget how many times the scratch trade saves them from a loss, or they give up on the scratch trade way too soon before realizing this.
The following exercises will demonstrate to you how often the scratch trade can save you from losing, and will also get you into the habit of doing them. Many people don’t realize just how quickly they should scratch a trade because they feel daft getting out of a trade so soon after getting into it, especially at the same price and so soon after getting into the position.
Remember, at this stage you are not trying to make money. Whether a trade ends up winning, losing or breaking even at this point is irrelevant.
Log into BetTrader about 10 minutes before the first UK horserace is about to start and open that race in the main display window, selecting the Ladder interface.
Select the £2 stake button, this will be the biggest bet that you will place today. There is no point in doing trades any larger than £2 bets at this stage. A good way to learn is to make as many mistakes as you can and not be afraid of getting it wrong in order to have a go. If you’re placing large trades then you’ll be trying to get everything right from the very start and missing out on one of your best ways of learning: to cock it up royally at every opportunity you get!
So, with your stake button set at 2 pounds, submit a Lay bet by clicking in the pink box on the left side of the ladder next to the price you want to Lay. Remember, you are not trying to make money so whether you think that the price is going to go up or down is irrelevant. You have no opinion and do not care if you win or lose this trade.
What is important is that you get matched, so choose the price 1 tick below what the Last Traded Price was and wait to see if you get matched.
As you are waiting to get matched keep the mousehand hovering over the blue Back box on the right side of the ladder directly opposite your Lay bid.
If the price moves up then move your Lay bid up by clicking and dragging it up the next box above it. Then hover the mousehand over the Back box opposite the new price on the right side of that same price.
As soon as your Lay bet gets matched it will disappear from the unmatched bet column and your position will display above the ladder as a green number 2. Now click your mouse so that a 2 pound Back bet gets placed at the same price at which you just Layed. The time between getting matched with your Lay bet and submitting your Back bet to get out at the same price should be less than 5 seconds.
Here are a few possible scenarios:
1. You Lay 2 @ 1.71 and as soon as you are matched you place a Back bet of 2 @ 1.71 which is matched instantly. You could see that your Back bet would be matched instantly at 1.71 because 1.71 was still strongly bid in the pink column when you submitted it. 1.72 trades out and the market goes up to 1.72/1.73.
2. You Lay 2 @ 1.71 and as soon as you are matched you place a Back bet of 2 @ 1.71 which is matched instantly. You hoped that your Back bet would be matched instantly at 1.71 because you could see that the 1.71 bid in the pink column was reducing in size as Backers were hitting it and almost immediately 1.71 trades out and the market goes down to 1.70/1.71.
3. You Lay 2 @ 1.71 and as soon as you are matched you place a Back bet of 2 @ 1.71 which is not matched instantly and remains as an unmatched bet. This is because the 1.71 bid which you were a part of got taken in full and the market went immediately to 1.70/1.71 when you got matched on your Lay. However, because you placed your Back 2@ 1.71 quickly you were very close to the front of the queue and your Back bet at 1.71 gets matched. Then 1.70 trades out and the market goes down to 1.69/1.70.
4. You Lay 2 @ 1.71 and as soon as you are matched you place a Back bet of 2 @ 1.71 which is not matched instantly and remains as an unmatched bet. This is because the 1.71 bid which you were a part of got taken in full and the market went immediately to 1.70/1.71 when you got matched on your Lay. Your Back bet doesn’t get matched and the market goes down to 1.69/1.70.
If done in normal trading conditions where the trader is trying to make money, Scenario 1 is often their last scratch trade! They scratch and immediately lose out on a profit. The memory of Scenario 1 stays with someone much stronger than scenarios 2 and 3 which are often forgotten about. But this shouldn’t be the case.
Scenarios 2 and 3 are the classic scratch trade. In both cases you have gotten out of the market quickly just as it has started to turn against you. Remember what happens immediately after you have scratched, often you will see the price move down several more ticks and if you hadn’t scratched when you had you would have taken a several tick loss.
Scenario 4 can be used as practice for getting out of a losing position. You are trying to Back in a falling market, experiment with how large your losses are in relation to how long you keep the position. You will find over time that the less time you are in a losing trade, the less you lose, but test this out for yourself.
Don’t take the losses personally, in these scratch trade exercises we are not even trying to make a profit. And besides, the losses are tiny, each one is well worth the few pence it costs you. There’s no such thing as a free lesson, but at least the lessons are very cheap!
Your definition of success at this stage is not how much money you make but instead how many trades you manage to do in each race.
When learning to trade, trying to avoid making mistakes from the very start is the biggest obstacle to success because your attachment to the money restrains you from pressing all the buttons and seeing what happens when you try stuff.
Take advantage of being able to trade so cheap and trade, trade, trade for the next month. You’ll be amazed at how much more comfortable and knowledgeable about price movements you’ll be once you stop trying to make money and instead do loads of trades. Then you’ll be ready to start trying to make money.