Betting exchanges have been around for a fair while now and revolutionised the online betting world when they were created. Although betting exchanges have been around for nearly 20 years now they are still not understood by quite a number of online bettors. So we have decided to produce a guide to using betting exchanges so hopefully our users will find the benefits of using betting exchanges and find out exactly how they work and how you, the punter, should use them.
What Betting Exchanges Do
As we mentioned above the concept of betting exchanges revolutionised online betting when they first came to be. It was an exciting time as online bookies where starting to become popular and then betting exchanges came and gave punters the chance to bet against each other, rather than just placing bets with a traditional bookmaker.
When betting with a traditional bookmaker you simply place a bet with them on the outcome of a sport or an event at odds that the bookie offers. With exchanges you have the choice to either ‘back’ or ‘lay’. As you can imagine ‘back’ is exactly like you would expect at the bookies where you bet on the outcome but there are even more options as the ‘lay’ option gives you the chance to act like the bookies and take someones bet.
What Betting Exchanges Are There?
Out of all the online betting exchanges by far the most famous, popular and most used is Betfair. They were one of the first betting exchanges to be launched and they have stood the test of time ever since. Being one of the first out of the traps was a huge benefit for Betfair as it made sure they had the first chance to get players in and make sure there is plenty of liquidity in their betting markets.
Another popular bet exchange is Betdaq which has pretty much always been the main rival to Betfair, although never been near the same scale as Betfair. There are also other betting exchanges such as Matchbook and Smarkets but if you are a beginner we certainly recommend sticking to either Betfair or Betdaq due to how much money will be traded on the betting markets.
How To Use Betting Exchanges
At first glance betting exchanges can look a little daunting as there seems to be a lot going on but once you have got used to it they are very simple sites to bet with. The first thing you will notice is that the odds are always displayed as decimal odds rather than traditional fractional odds. As an example we are going to use a horse race on Betfair but the same will apply to any other betting markets.
The first thing you’ll need to know is what bet do you want to place, either a back or a lay. First we’ll look at the back side.
As you can see in the image above there are 2 sections, the ‘back’ and ‘lay’ sections. When betting (or laying) on exchanges you are betting against another person so you have to agree your odds. We will use the favourite here, War Ensign as the example. In the blue section you will see odds of 2.34 being offered, these are the best odds being offered at that time and you will see £738 is the amount that can be bet on at that time at those odds, because that is what other people are willing bet against. Now say you think the odds of 2.34 are a little short you can request different odds and hope someone will take the bet. If you wanted to try and get odds of 2.36 you enter you desired stake and ‘queue’ for those odds to be matched, meaning your bet has been accepted. It is worth mentioning though that this isn’t always guaranteed that your bet will be accepted if the odds keep on shortening.
As you have probably worked out now for betting exchanges to work you not only need people to bet but also people to lay bets, to act as the bookie. The ‘lay’ process is the same as the ‘back’ as agreeing odds but you should be aware it can be very costly if you get it wrong. When you are laying you normally would be saying you don’t fancy that horse (in this example) to win. When laying though you really need to understand how the liability works. Obviously if you place a bet of £10 at 4/1 and it loses you lose your £10 stake, but if you lay a bet of £10 at 4/1 and that horse wins, meaning you have lost, you have to pay out at 4/1 and will lose £40. If the horse loses and you win you will collect the £10 lost stake.
Trading on Betting Exchanges
One feature that this style of betting brought into mainstream betting was the ability to ‘trade’ and lock in profit. As betting exchanges are fluid, live markets, with many betting markets going live ‘in-play’, meaning you can bet as the event is taking place.
This isn’t straight forward and sometimes can go wrong like any form of gambling but does offer the chance to take some risk out of bets. We’ll use a football match as an example for this, say Manchester United v Liverpool. In this game you fancy Manchester United to win so place a £10 bet at 3.0 (2/1). The game kicks off and United score an early goal and the odds on Manchester United drop to 1.5 (1/2). A lay bet then can lock in profit whatever happens. You can lay Manchester United, basically saying they won’t win, for £11 which would give you of a liability of roughly £5.30. From this point no matter what happens in the match you are certain to make profit. If Manchester United win you collect your £20 winning profit but have to pay out the £5.30 you layed as your insurance. Now if Manchester United failed to win you lose your initial £10 stake but because you also layed Manchester United at 1.5 you collect £11 giving you a profit. Obviously it isn’t always that simple but you can see how the principle can work.
Other Betting Exchange Information
You may have read this through and thought ‘how do the betting exchanges make money’. Well the simple answer is they charge a commission. Mostly exchanges will charge a commission on winning trades. Betfair have a 5% fee on winning trades although you can earn loyalty points which decreases this rate while Betdaq charge 2% commission.
As you are betting against other punters on exchanges then you can get better odds than with traditional bookies so the commission can be a small price to pay to get better betting odds.