A Beginner’s Guide To Betting Exchanges
The fundamental difference between betting with a bookmaker and betting on a betting exchange is that with the exchange you are not betting against the bookmaker but against other people. The exchange acts as the middleman, matching people with differing opinions on the outcome of an event and holding the money until the result is known. For this, the exchange charges commission on each winning bet. It is from the commission that the exchanges make their money.
The other main difference is that when backing with a bookmaker you are betting that something will happen e.g. Man Utd will win the Premiership this season, but with an exchange you can bet on an event not happening e.g. Man Utd will not win the Premiership this season. This is known as laying and is what bookmakers do when they accept your bet.
Example: The odds on Man Utd to win the Premiership this season are as follows,
If you fancy Man Utd to win and back them to win for £50 at 3 and they do win you will receive £150 (£50 X 3) for a profit of £100. Although you will have to pay a percentage of this profit (initially 5%) as commission so your profit will be just under £100. If they do not win you will lose your £50.
However, if you don’t think they will win and decide to lay £50 at 3.2 and they do not win you will win £50 (less commission). If they do win you will lose £110 (£50 X 2.2 = £110). When you are laying you are effectively acting as a bookmaker and offering the odds to a backer.
The amount of money you you stand to lose by laying is known as your liability and is calculated by subtracting 1 from the odds offered and multiplying by the stake. From the above example.
3.2 – 1 = 2.2
2.2 X £50 = £110
Your liability on this event is £110
Exchanges offer a huge range of markets, everything from Big Brother to Volleyball with the most popular being horse racing and football. Millions of pounds are matched every day on the exchanges.
The first time you log on to an exchange and select a market can be quite intimidating as you are presented with a screen full of numbers. However, it is all quite straightforward once explained. For each selection in the market you will see six boxes, the three best available back prices and the three best available lay prices. Below the price in each box is the amount of money waiting to be matched at that price.
The huge advantage that exchanges have is that if you do not like the price that is available you can offer up your own price. If the best price available to back a selection is 4.5 but you do not want to back at less than 5 you can enter a bet at 5 and the amount you want to back it for into the exchange then wait to see if your bet is matched. The prices on the market are constantly changing and your bet may be accepted but there is no guarantee that this will happen as the price may go down rather than up. It depends on how many people want to back compared to the amount who want to lay. If your bet is not matched then you do not lose as your stake is returned to you.
You can do the same if you want to place a lay bet but you feel the current best price on offer is too high. You can enter a lower price in to the exchange and wait for it to be matched.
The other advantage is that generally prices are better on the exchanges than the bookmakers although the shorter the price the smaller the difference.
Due to the constantly changing markets a whole new type of betting has been created which involves both backing and laying on a single outcome. This is known as trading and can be very profitable if done correctly. See the trading section for further information.
Exchanges also offer the opportunity for betting once an event has started until the event is completed, this is known as in-play betting. This means that you can bet on an event right up until the end.
The major exchanges offer comprehensive tutorials on their sites which will teach you everything you need to know before you take the plunge.