In this article, we’ll explain how to use a betting exchange and the benefits and drawbacks of using one. We’ll also answer some of the most common questions about betting exchanges, including what they are, how they differ from bookmakers, and whether or not they offer better value for bettors.
What is a Betting Exchange?
If you’re interested in sports betting, then you’ll want to know how to use a betting exchange. A betting exchange is a platform that allows bettors to bet against each other, rather than against a bookmaker.
How does a Betting Exchange Work?
The exchange platform facilitates the exchange of bets by matching opposing bets between two or more users, effectively creating a marketplace for betting. This means that bettors can both back and lay bets, essentially giving them the option of becoming both the bookmaker and / or the punter.
Who Sets the Odds?
The odds offered on a betting exchange are also unique compared to traditional bookmakers. Instead of bookmakers setting the odds, they are set by the market, people like you and me!
For instance, In a game between Arsenal and Tottenham, you might think Arsenal will win, I might think Arsenal will lose. We take available prices or ask for better prices on the exchange. The market forms because thousands of people have their own opinions of the game and what the prices or odds should be on a ‘Win’ ‘Draw’ or ‘Loss’.
How to use a Betting Exchange. Two Options.
When placing a bet on a betting exchange, there are two options. Back bets and Lay bets. A back bet is the traditional type of bet, where a bettor is betting that an outcome will happen. A lay bet is essentially the opposite of a back bet, where a bettor is betting that an outcome will not happen.
Betting exchanges also charge a commission on winnings, which is typically a small percentage of the profit made on each bet. This commission can vary between exchanges and can, in a small way, impact the overall profit or loss for the bettor. The commission rate across exchanges is in the region of two percent.
Advantages of a Betting Exchange
Compared to traditional bookmakers, betting exchanges offer a number of advantages.
- Dynamic Environment: You can bet on or against selections. Users can profit from a selection winning but also ‘not winning’ or losing losing. Which creates a dynamic betting and trading environment.
- Better Odds: You almost always get better odds on an exchange than those offered by bookmakers. This is because the odds are set by the users / market, not the bookmaker.
- Option of Large Stakes: Your stake is only limited by the amount available at the odds. There is generally plenty of liquidity in popular sports markets.
- Less Restriction: Betting exchanges do not impose the same restrictions on users as traditional bookmakers. This means that users can bet on any market they want, and they won’t be limited or banned for winning.
- Ask For Better Odds: You can ask for a better price than is on offer.
- ‘Buying’ and ‘Selling’: You can use trading and arbitrage techniques to trade off prices.
- Markets: A wide range of liquid markets available including live / in-play markets.
- Commission: Betting exchanges make their money by charging a commission on winning bets. Users only pay when they make a profit.
Disadvantages of a Betting Exchange
- Complexity: Betting exchanges can be more complex than traditional bookmakers, especially for users who are not familiar with the concept of laying bets.
- Lack of promotions: Betting exchanges do not offer the same kind of promotions and bonuses that traditional bookmakers do. This means that users may miss out on some opportunities to boost their profits. However, the better odds available on the betting exchanges will generally more than compensate for lack of promotions over the long run.
- Market liquidity: The liquidity of the market can vary depending on the popularity of the event and the number of users. This means that users may not always be able to get their bets matched at the desired odds, especially early on in the development of a some markets.
The Concept of Profit and Loss from ‘Backing’ and ‘Laying’
When betting on the exchanges, bettors may need to consider a different type of profit and loss ‘spread’, from ‘backing’ and ‘laying’, in terms of their results.
The amount of profit or loss a bettor makes on a bet, depends on the odds they bet at and the outcome of the event.
Backing a bet on a betting exchange is the same as betting on a selection in the traditional way, like placing a bet with a bookmaker.
Laying a bet is different. Bettors are betting against a selection, so they don’t want it to win. The bettor stands to make a profit equal to their stake. However, if the selection wins, they will lose the amount equal to their stake multiplied by the odds at which they laid. In this sense ‘laying’ is like being a bookmaker and receiving money from losing bettors.
Exchange bettors need to bear this in mind, as backing and laying may impact their overall betting strategy and bankroll management.
How Do I Place a Bet on a Betting Exchange?
To place a bet on a betting exchange, you’ll first need to create an account and deposit funds. Then find the market you’re interested in. For example, if you want to place a bet on a football match involving English Premier League teams, you can search for the relevant market. Once you’ve found the market, you can view the odds on offer for different outcomes. To place a bet, simply click on the odds you want to offer or take, and specify the amount you want to wager. Or ask for a better price.
Let’s say you want to back Chelsea to win their match against Arsenal. You find the market for this match and see that the current odds for a Chelsea win are 2.50. You decide to place a bet of £10 at these odds. If Chelsea wins, your profit will be £15 and you’ll receive a total pay out of £25 (which includes your original stake).
On the other hand, if you don’t think Chelsea will win, you can ‘lay’ a bet against them. You offer £10 at odds of 2.5 to lay Chelsea. If Arsenal wins, or draws, you’ll win £10 (your original stake). If Chelsea win, then you will have to pay out £15 (£10 x 2.5 – £10). Note: that this is more than your original stake. This is because you are effectively acting as a bookmaker.
If you still aren’t clear, then check out my video below. There are more written examples to follow beneath this video.
Another Backing and Laying Example
The odds of the betting exchange for this game are:
- Liverpool to win: 2.2
- Draw: 3.5
- Manchester United to win: 3.6
Let’s say you believe Liverpool will win the match, and you want to back them at odds of 2.2.
If you back Liverpool with a stake of £10, your potential profit will be £12 (i.e. £10 x 2.2 = £22 – £10 stake = £12 profit). However, if Liverpool loses or draws the match, you will lose your £10 stake.
Now let’s say another user on the exchange believes Liverpool will lose the match and wants to lay them at odds of 2.2. If you lay Liverpool with a stake of £10, your potential profit will be £10 (i.e., £10 stake x 2.2 = £22 – £12 liability = £10 profit). However, if Liverpool wins the match, you will have to pay the other user their winnings, which in this case would be £12.
Remember with ‘laying’ you are essentially acting as the bookmaker and taking on the associated risk. You will need to pay out if the selection wins. You do, however, have the benefit of the draw ‘on your side’.
How Do You Trade on a Betting Exchange?
Another way to use a betting exchange is to trade on the markets. This involves placing bets at different prices to lock in a profit regardless of the result. This is known as trading. The exchanges can also be used to find occasional arbitrage opportunities.
Let’s say you want to trade on Manchester City v Arsenal. You place a bet of £10 on Arsenal by backing them at odds of 3.8. Their price comes in to 3.2 (either before the kick-off or in-play). You can then ‘trade out’ by laying at 3.2.
Your profit from the first bet is potentially £28.00 (£10 x 3.8). Your liability from the second bet is potentially £22.00 (£10 x 3.2).
You have just gained £6.00 of ‘free money’ so to speak. You will now have zero liability on Manchester City and the Draw and a £6.00 profit on Arsenal, if they win the game. You can also now opt to adjust your position with small stakes to reduce your profit on an Arsenal win and add some profit to the Draw and Manchester City win market. Doing this will ensure a profit whatever the result.
Betting exchanges have disrupted the sports betting industry by enabling users to bet against one another, rather than against a bookmaker. This has resulted in better odds, increased transparency and a more dynamic and engaging betting experience.
Betting exchanges continue to be a great alternative to traditional bookmakers. While there are a few disadvantages to using a betting exchange, the advantages make it a worthwhile option for many users.
Just be sure to understand how to use a betting exchange before diving in.
Find out more about my own trading strategy and check out my results.