What would Betfair be without racing? Indeed what would any bookmaker be without the horses?

Very little probably, because horseracing is the staple of all their businesses; in fact it's above 70 per cent, which makes the sport absolutely crucial to the exchanges, and the bookies.

The great interest in the sport among the punting fraternity and rapid turnover of events ensures a constant stream of money.

A football match lasts 90 minutes whereas a race is between one and five so race aficionados have anywhere up to 27, sometimes 28 races a day which means they can bet once on each event and have 28 bets.

Quite simply, that is why racing is so important to all bookies or betting mediums. It guarantees turnover, which in turn guarantees revenue. This is something I needed to learn more about; particularly, could I make money from it?

What I set out to do was try to find a way to make money without needing a fund of knowledge on form, horses or jockeys.

Sounds ridiculous, I know, but my first view of the minutes before a horse race on Betfair was of prices fluctuating rapidly in exactly the same way they do in the foreign exchange market.

Straightaway, I realised that the market forces would also be similar and, therefore, also the requirements to do well.

I had worked as a money-broker for a bit and one of the first bits of advice I was given (well, had rammed down my throat in the macho manner that infests city trading rooms), was that the product did not matter, only what forced it to change price. in other words, who cared if it was the dollar, the yen or the Thai baht?

Where was it going? And why? Were we making money out of it? If not, why not?

Dollar, horse - for many, both are the same vehicle, a vehicle to trade around; the numbers the important thing.

With further research and a couple of days in the company of a trader who did exactly that, I learned the basics of trading horses without worrying about the race.

In fact, the only important thing about the race for this trading is the exact start time because all positions are squared away by then, leaving no exposure or liability for the race itself.

These people I think of as "mechanics". The racing is irrelevant, the traditional supporting a horse is irrelevant and they resemble the normal racing punter as much as Hollywood blockbusters on historical events do the truth.

So what does the mechanic do? Pick a race and focus solely on the favourite. It will be the vehicle that most money is concentrated on and therefore have most volatility. ]hat is what the mechanic wants.

The numbers below the prices are the amount available to trade and are an indication of supply and demand. The mechanic is trying to work out in which direction the price is going to move in the next few seconds and to get his bet on just before it moves.

Mechanics do not care if they back or lay the horse to begin with because they know that before the race they will have no outstanding position. That is their discipline.

So they back the horse because the money, the price graph and the momentum suggests the price will shorten, or they lay it because of the opposite when the information suggests that it is more likely to lengthen.

When they have the first half of a trade, they are desperate for the second half. If the first trade is a "back" they now offer up a lay price and hope it gets hit. If the price goes with them and they lay the horse back for slightly more than they backed it, they have their desired win whatever the result.

It could win, lose, die, or throw its jockey into the stand. It does not matter. They have traded it for a profit. Conversely if the price moves against them, gets longer, they will immediately cut out of the position for a small loss.

Their whole modus operandi is based on winning ticks. So to lose more than ticks would be foolish, more than damaging, bankrupting. These mechanics are pro's and cannot afford to gamble their bank.

Win small, lose small and never be exposed to the race itself. This final part is so important to the mechanic because to make all this worthwhile he has to bet a fairly substantial sum on each race.

One I watched would use anywhere between £2,000 and £3,000 on his trades. Example: Lay £2,000 @ 2.32 liability £2,640.00. Back £1,980 @ 2 34 profit £2,653.20. His profit, ignoring commission for this race, would be either £20 or £13.20.

Once completed he would search for another opportunity on the same horse; indeed I watched him on one occasion do exactly the same trade at the exact same prices three times on the same race in a couple of minutes before the start.

His guaranteed profit from those three trades was about £80. Brilliant! And only one race and without risk; he did not care who won.

When I complimented him on this he was adamant that it only worked if he immediately cut out of a position if the price moved against him. Even in success he was quoting the discipline needed - a true professional.

His usual win was normally around £10, or a couple of hundred a day. Not bad work when it is tax-free.

Now, trading the horses does not necessarily mean being a mechanic. If the odds are better then punters can do the usual and back a fancy~ or do similar by laying a horse they don't like. In between this more normal betting and the highly specialised, hi-octane mechanic is a different style.

Much of his method is that of the mechanic but without the absolute discipline. I shall refer to them as hybrids. His initial plan is the same as the mechanic. He wants to trade in and out of a horse before the race but he also wants a bit more protection, so his opening trade, the first half, will be one he is more happy with if the price moves against him.

By restricting himself to only taking a trade that he believes to be fundamentally correct anyway; for instance, laying a horse he thinks will lose, he allows a little leeway on the second trade, the closing half of the bet. This is less disciplined than the mechanic and usually played for lesser stakes and if the price moves against him he can get out of the majority of the position and therefore most of the liability.

What he does is leave himself a manageable loss if it does indeed win and a profit if it loses. This is not the manner of the real professional unless of course his opinion on the form is utterly professional, but it is still a reasonable trade.

I must admit here and now that this is mostly how I trade on the horses.

My horse strategy is as thus: Only really trade chases and hurdles and the favourite in each race for the reason of volatility and interest.

Races of two miles I stick to the mechanic method and never leave any exposure for the race. Upwards in distance from there I choose a horse priced 4.0 and shorter and lay as the opening trade. If it goes with me I will get out of some of the bet, and the bigger the liability the more I will reduce it.

In fact, if the initial lay was at the top end of my target range I will tend to get out of it completely but the shorter price lays in the longer races I leave part for the actual race to trade out in and if the horse struggles during the race I let it expire naturally with the finish of the race.

I trade it in-running but even then with a strategy. If I have layed a horse at three, I am confident that during the race it will trade at least up to five without much concern. The key is to get an order up immediately the race is put in-running and then watch.

If it sits near the back of the field the price will drift out and if it jumps one fence poorly the price will kneejerk out.

Either occurrence can and probably will hit the order left up to leave a profit whatever the result and no liability.

For some races I will hover my finger over the cancel button while watching the price and listening to the commentary.

If the words "off the bridle" are mentioned about my horse I hit cancel and hope to be quicker than everybody else.

Those words startle the prices like an electric shock because they mean the horse needs some harder riding to keep up. Although horses sometimes recover from this and go on to win, the usual in my watching has been for a dismal show or at least the price to move considerably out before adjusting again if the horse shows good signs again.

Other times I will take a view during the race, aided by commentary and the prices themselves, that my horse is beaten and then cheer on everything else. Because I never bet that aggressively in stake terms I can do that, and have made small profits doing so.

This is my kind of horse racing betting because it is part system and part enjoyment but it is also reliant on the fact that the smaller amounts traded during a race are still big enough to accommodate my strategy. If I needed to trade $3,000 mid-race I would struggle.

The problem with the horses on Betfair or the other exchanges is that it is a damned hard grind. Sitting in front of a screen watching decimal numbers tick back and forth is as hard a job as any I have ever attempted before.

Indeed, there is no difference between the mechanics on Betfair to forex dealers or day traders on shares.

It is a lonesome, anti-social existence. Five hours and upwards during the summer alone with only a clicking cursor for company and the only gauge of satisfaction is the account balance.

If I were going to suggest this kind of job to anyone I would advise them to do it for a bank and at least receive a salary for the trouble.

And that is the problem for a mechanic horse-trading on exchanges - the salary is fought for every single race. Tax-free it may be but unless the hours are spent ekeing out a sliver of profit from each race, there is no pay, whereas a few dozy hours in the city and the payment slip still shows a reward.

Partly, I admire those that have chosen to take full responsibility for their finances. They benefit from the tax-free status but take enormous stress and, let's not forget, RISK. This refusal to rely on others I can only applaud but it comes at a cost for many.

Most that I have met are geeks, or noticeably insular. The basic social skills can often be lacking and partly, I believe that is because a lot of their day is spent in solitude, or even solitary confinement. The numbers, the cursor and the ether are their only interaction.

The offices of Betfair are as new as the company itself - all floor to ceiling glass panes and chromed borders. It screams modern, casual, hip and functional. The reception is small and my eye is drawn to a big flat TV screen showing one of the Williams sisters absolutely annihilating her opponent.

Alongside is a smaller screen showing Betfair's page on the match. The numbers constantly click over, expressing the opinions of the massed hordes that sit in rooms, offices and, more frequently, lounges, with a TV and a computer for company.

Don't believe the massed hordes bit? Well, during the summer of 2003 Betfair had over 100,000 clients and it is they who take, offer and reduce positions and make the numbers click round.

Without them and their opinion's the numbers would not appear, so Betfair resembles a giant voting booth - democracy at work, unlike a few miles up river where democracy is frequently emasculated by the Whips, party loyalty and egos of politicians.

One set of numbers hardly moves. Williams, Venus or Serena, it matters little, is a surefire cert until at the very earliest the quarterfinals stage and therefore is priced at about 1.2 back and someone is asking for 1.5. I doubt they got taken. The next move would be down towards 1.1, then 1.08, 1.06 and finally the last vestige of the "bots" at 1.01.

Betfair founder Andrew Black says the idea for a betting exchange came to him while pottering about a Cotswold cottage.

"I knew I could write the software," he explained. 'That was the easy bit but what I had to consider was how the whole concept would work. Would people want to bet on a site, offer odds, trust their money was safe? I worked all these and many more ideas through until I felt confident I was right.

"One important bit I remember thinking was that the odds had to be ordered like the share prices on the New York Stock Exchange so people could see the next prices offered, both on the buy and sell side..."

This is an edited extract from the best-selling book Game, Set and Matched (224 pages) by lain Fletcher, available from www.gamblingbooks.co.uk.

By Iain Fletcher