How to Use A Betting Exchange: A Beginner’s Guide... -

Betting exchanges are revolutionizing the way people place bets. Unlike traditional bookmakers, exchanges allow you to bet against other users, offering better odds and more control.

For beginners, using a betting exchange can seem overwhelming, but it’s easier than you think! In this guide, we’ll explain what betting exchanges are, how they work, and why they’re a smarter choice for bettors.

What is a Betting Exchange?

A betting exchange is a platform where users bet directly against each other instead of a bookmaker. This unique system allows you to either back a selection (bet on something to happen) or lay a selection (bet on something not to happen). Exchanges like Betfair and Smarkets are popular platforms where users can enjoy competitive odds and more flexibility than traditional sportsbooks.

Unlike bookmakers, who profit by setting odds in their favor, betting exchanges simply charge a small commission on your winnings. This means you’re effectively betting at “true odds,” as the prices are determined by market demand rather than house profit margins. This is why Betfair pricing is so accurate.

How Does a Betting Exchange Work?

The mechanics of a betting exchange are different from a traditional bookmaker. On an exchange, you’ll see two main options:

Back Bets: This is similar to placing a bet with a bookmaker. You choose a selection (e.g., a team to win) and place a wager at the offered odds.
Lay Bets: This allows you to act as the bookmaker, betting against a selection. For example, if you think a horse won’t win, you can offer odds for others to bet on it.

Here’s an example:

Imagine you’re betting on a football match where Team A is offered at odds of 2.5 to win.

If you place a back bet, you’re betting that Team A will win. A £10 bet at 2.5 odds would return £25 if Team A wins.
If you place a lay bet, you’re betting that Team A will not win. If another user accepts your lay bet for £10 at 2.5 odds, you’ll profit £10 if Team A loses or draws, but you’ll need to pay out £25 if Team A wins.

This dual functionality is what makes betting exchanges unique, offering more opportunities for bettors to trade and hedge their bets.

Here’s a short video to help explain that…

How Betting Odds Work on Exchanges:

One of the biggest adjustments for new users is understanding the odds on betting exchanges. Unlike the fractional odds used by traditional bookmakers, exchanges display odds in decimal format. Decimal odds are straightforward and show your total return for every £1 wagered, making it easier to calculate potential winnings.

Another key difference is the precision of odds movements. On a sportsbook, odds might jump from 5/1 (6.0) to 9/2 (5.5). In contrast, betting exchanges allow for smaller increments, such as 6.0 to 5.9, 5.8, 5.7, and so on. This gives you more opportunities to secure better odds even if the market moves slightly.

For example, let’s say you’re betting on a horse race. A bookmaker might offer 6/4 (2.5) odds on a horse, but on a betting exchange, you might find odds of 2.48, 2.46, or 2.44. Over time, these small differences add up to significant value, especially for regular bettors.

Why Do Betting Exchanges Offer Better Odds?

The reason betting exchanges offer better odds lies in the concept of the “overround.” This is the percentage sum of all possible outcomes in a market. In an ideal scenario, the overround adds up to 100%, meaning you’re betting at true market odds.

On a betting exchange like Betfair, the overround is typically close to 100% because odds are determined by the collective betting activity of users. For example, if a coin flip market is balanced, heads and tails would each be offered at 50% (2.0 odds), creating a perfect 100% overround.

Bookmakers, however, operate with a higher overround—often between 130% and 140%—to ensure their profit margin. Using the same coin flip example, a bookmaker might offer 1.83 odds on both heads and tails. Over time, this significant difference means you’re losing value on every bet placed with a traditional bookmaker.

How to Get Started with a Betting Exchange

For beginners, making the transition to a betting exchange can seem daunting, but the process is straightforward.

Follow these steps to get started:

Sign Up: Choose a reputable betting exchange like Betfair or Smarkets and create an account.
Understand Back and Lay Bets: Spend time familiarizing yourself with the interface and the back/lay system.
Start Small: Begin by placing simple back bets to get comfortable with the platform before exploring lay bets.
Monitor Liquidity: Liquidity refers to the amount of money available in the market. Higher liquidity markets, such as football or horse racing, offer more stable odds and opportunities.

Why Betting Exchanges Are a Game-Changer

Using a betting exchange isn’t just about better odds—it’s about more control. On an exchange, you decide the price, you have the ability to trade your position, and you can bet in ways that aren’t possible with a bookmaker. For example, if odds shorten after you’ve placed a back bet, you can lay the same selection to lock in a profit regardless of the outcome.

Additionally, betting exchanges reward informed decisions. Unlike bookmakers, who might limit or ban profitable bettors, exchanges welcome all users because they thrive on market activity.

Conclusion

Betting exchanges are a must for anyone serious about betting or trading. They offer better odds, more control, and endless opportunities to trade positions. While the initial learning curve may seem steep, the benefits far outweigh the challenges. Start small, understand the mechanics, and you’ll soon wonder why you ever used a traditional bookmaker.

If you want more detailed strategies and tips for trading on a betting exchange, check out our comprehensive course products here.