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Guide to Exchange Betting

Guide to Exchange Betting

Exchange betting can no longer be considered a “new” way to bet on sports. We were surprised to find that it has been around for over 15 years now, and it’s still incredibly popular. Well, it’s popular among bettors anyway. The bookmakers don’t like it, simply because it takes them entirely out of the picture.

As popular as exchange betting is, there are still some parts of the world where it hasn’t really taken off. And there are still plenty of people who don’t understand what it’s all about. We’re often asked to explain how exchange betting works, which is why we’ve put together this comprehensive guide. It covers everything you need to know about exchange betting, and includes some useful advice for making the most out of the opportunities it presents.

Before we discuss exchange betting in detail, we should first give you the necessary background information. Exchange betting was first introduced just before the turn of the century. A number of gambling sites started to offer this new sports betting concept, including one called Betfair. They launched in the United Kingdom amid a great deal of publicity, and are still the number one betting exchange today. In fact, they’re one of the largest online gambling operators in the world.

What made Betfair so appealing? They claimed that they would one day bring about, “death to the bookmaker.” This gave many bettors hope, to say the least, but they have yet to live up to their claims. Chances are, they never will. Betfair probably doesn’t really care either way at this point. Their initial claim attracted a lot of attention from the sports betting industry, causing everyone to want to know more about this revolutionary way to bet on sports.

While we would never deny that exchange betting is revolutionary, we would like to point out just how straightforward it is. As we already mentioned, it takes the bookmakers out of the picture. It allows individuals to place wagers with other individuals. They effectively agree on the odds and stakes for a wager between themselves, by using an online betting exchange platform. That’s essentially all there is to it.

Exchange betting offers a number of significant advantages over traditional methods of placing wagers. These advantages are largely why it has become such a popular way to bet. There are some disadvantages too though. We’ll explore both the advantages and the disadvantages later in this article. We’ll also explain more about how everything works. First, though, we’ll have to go over backing and laying. These terms are crucial to know before you fully can understand how exchange betting works.

Backing & Laying Explained

While the terms backing and laying can be confusing at first, once you learn more about them, you’ll quickly find that they aren’t nearly as complicated as they seem. We’ll start by explaining backing in laments terms.

Backing a selection is betting that it WILL happen.

Anyone who has experience with sports betting should already be familiar with this term, as it’s what we do with traditional bookmakers. If we think a soccer team has a chance to win an upcoming game, then we must BACK them to win. If we think that a football team is going to cover the spread in an upcoming game, then we BACK to them to cover. There are, of course, countless other examples we could give too.

When we’re backing a selection, we take the odds on offer at the time of placing a wager. If the odds of a selection are 2.00, for example, then we get paid out at those odds if our wager is successful. We also get our initial stake back. That pretty much sums up what backing is all about.

Laying is what most people struggle with. To put it simply, though, laying is the opposite of backing.

Laying a selection is betting that it WILL NOT happen.

Laying is what the bookmakers do when they take our bets. So when we’re backing a soccer team to win, they’re effectively LAYING that same selection. They take our stake, and agree to pay out at the agreed odds if our selection is correct. They get to keep our stake if our selection is wrong.

Now, with traditional bookmakers we can ONLY back our selections. We’re always the backer, and the bookmaker is always the layer. When exchange betting, however, we can choose to be either the backer OR the layer. We can still back selections, but we can lay them too. The only catch is that there has to be someone willing to take the other side of our wager. Let’s take a deeper look into exactly how all this works.

How Betting Exchanges Work

There are several different betting exchanges to choose from, and each one uses its own platform. The basic principle is the same across them all though. Just like most online betting sites, they display the betting markets for upcoming sports events. They list the various selections available, and the associated odds. The biggest difference is that they show an option to back and an option to lay.

Here’s an example of what a betting exchange looks like. This screenshot shows a few upcoming football games.

An example betting market at a betting exchange

Normally you’d expect to see just two sets of odds for each game. One set would be for one team to win, and the other set would be for the other team to win. In this example, there are four available sets. The odds with the blue background are the available odds to back, and the odds with the pink background are the available odds to lay.

Let’s say we want to back the Miami Dolphins to win their game against the San Diego Chargers. The available odds for this are currently 2.94. So we’d click on the 2.94, which would add the selection to our betting slip. We’d then input how much we want to stake, and the relevant amount would be deducted from our account.

So far, there’s no difference between using a betting exchange and using a traditional betting site. Keep in mind, though, we’re not actually placing our wager with a betting site here, or even directly with the exchange. The exchange is just the middleman. We’re placing our wager with someone who has already chosen to lay the Miami Dolphins. That person is effectively acting as the bookmaker, which means they’re liable to pay us at the agreed odds if we win.

What a betting exchange does at this point is handle the necessary financial transactions. They take our stake from us, and they take the potential payout from the layer.

How backing and laying works at betting exchanges

The exchange then holds this money until the outcome of the wager is determined. Once it is, the exchange then pays out accordingly. If the Dolphins won, we’d receive the payout and get our initial stake back. If Dolphins didn’t win, the layer would receive our initial stake and get the potential payout back.

At the point of settlement, the betting exchange deducts a commission from the winning side. This varies at different exchanges, but is typically around 2-5%.

The process is essentially the same when we want to lay a selection rather than back one. We just click on the odds to lay, and input how much we’re prepared to risk losing. Our action is then matched with someone who wants to back the same selection. Their initial stake will be deducted from their account, and our potential payout will be deducted from ours. Once the relevant outcome is determined, the wager will be settled accordingly.

There’s one more big difference between exchange betting and traditional betting. At the point of backing or laying a selection, we have two options.

  • We can accept an existing proposal at the agreed odds.
  • We can make a new proposal at our preferred odds.

In the example we gave earlier, when backing the Miami Dolphins, we were accepting an existing proposal. We took the odds that were already on offer and just decided how much to stake. Had we wanted to make a new proposal, we could have set the odds at any level we wanted.

Let’s assume we only felt comfortable backing the Dolphins at odds of 3.10, so we made a proposal at those odds exactly. As long as there was a layer willing to accept those odds, a wager would have been struck and the rest of the process would have been the same. Our stake would be deducted from our account, and the potential payout would be deducted from the layer’s account.

Obviously, technology plays a huge role in making sure betting exchanges run smoothly. The basic mechanics are as simple as we’ve described here though, and using a betting exchange is really not difficult. As long as you understand the difference between backing and laying a selection, you should have no problem adjusting to this type of betting.

The question now is whether this type of betting is something you want to get involved with. To help you answer this question, let’s take a look at its advantages and disadvantages

Advantages of Using Betting Exchanges

The hardest part of sports betting is, of course, predicting what’s going to happen. It doesn’t matter how much we know about a particular sport and its participants, there’s always a chance of the unexpected. It’s impossible to make accurate predictions all the time, and it’s also unnecessary. As long as we are putting our money in the right spots and always looking for value, we can make an overall profit even when we make mistakes.

The key to success therefore lies in identifying the best opportunities. This is where using betting exchanges can really help. Their single biggest advantage is the simple fact that we can choose to lay selections. This is something we just cannot do with traditional bookmakers and betting sites, and it opens up many additional opportunities.

More opportunities mean a greater chance of finding good spots to bet.

As we’ve just said, predicting what’s going to happen is hard. The great thing about being able to lay selections is that we can make money from predicting what’s NOT going to happen. This is often much easier.

More often than not, we’re more likely to win money by betting on what’s not going to happen. Take the correct score markets in soccer for example. Picking the exact score in a game is impossible to do on a consistent basis. We might get it right every now and then, but it really just comes to down to luck. There are so many possible options to choose from. Even if we could rule out either team scoring more than two goals, the following outcomes are still possible.

  • 0-0
  • 1-1
  • 2-2
  • 1-0
  • 2-0
  • 2-1
  • 0-1
  • 0-2
  • 1-2

That leaves us with nine options to choose from. While we could probably eliminate a couple more possibilities, there would still be quite a few left over. It’s easy to see why even the most knowledgeable soccer fans struggle to accurately predict correct scores on a regular basis.

However, there’s a very good chance of regularly predicting which scores WON’T happen. In games between two strong attacking teams, for example, we can be pretty sure that a 0-0 result is very unlikely. In games between two defensive teams, we can be pretty sure that a 2-2 result is unlikely.

We could offer many more examples, but you should be getting the idea. We’re not saying that it’s easy to make a long term profit from laying, because it isn’t. It certainly provides us with a lot more opportunities to consider though, and those opportunities undoubtedly have the potential to be profitable.

Another major advantage of using exchanges is that it makes it much easier to manage risk exposure. A good example of this is if we’ve backed a selection that subsequently shortens in price (i.e. the odds get lower). We can then lay that same selection if we want to, to either guarantee some profit or reduce our potential losses. This is known as hedging, and here’s how it works.

Let’s say that we liked the look of the Dallas Cowboys at the start of the 2016 NFL season. Their odds to win the Super Bowl were 21.00, and we felt that this represented great value. We decided to back them for $100, for a potential win of $2,000. Nine games into the season, they were top of the NFC East with eight wins to their name and just one loss. They were playing very well, and looking like real contenders for the Super Bowl.

As a result, their odds dropped significantly. They were now just 7.00 to win the Super Bowl.

At this point there were two possible outcomes for us.

  • The Cowboys go on to win the Super Bowl, and we make a $2,000 profit.
  • The Cowboys fail to win the Super Bowl, and we lose $100

We could have simply let our wager ride, but we decided to hedge it. Although the Cowboys were looking good, we felt that the Patriots were looking even better. We wanted to profit from our wager while we could. We did this by LAYING the Cowboys at 7.00, for $200.

The two possible outcomes were now as follows.

  • Cowboys win. We win our initial wager for a $2,000 profit, and lose $1,200 from our lay. Total profit is $800.
  • Cowboys fail to win. We lose our initial wager for a $100 loss, and win $200 from our lay. Total profit is $100.

This is a prime spot to be in, because no matter what happens, we’re going to make a profit. There are many more ways we can use exchanges to hedge existing wagers. We explain this in more detail in the article below.

The third big advantage of using exchanges is the fact that the odds for backing selections are frequently better than those offered by bookmakers. Even taking into the account the commission we have to pay when using an exchange, we very often stand to make more money on our winning wagers than we would if using a bookmaker or online betting site. The differences are very small, but they add up over time. It’s certainly worth comparing what’s available before placing a wager.

Now that we’ve covered the three main advantages of using exchanges, it’s time to move on to the disadvantages.

Disadvantages of Using Betting Exchanges

There are two disadvantages that we believe everyone needs to be aware of before they decide to use betting exchanges. They don’t raise too much concern, in our opinion, but they’re still worth mentioning.

The first disadvantage is that the bonuses and rewards available at betting exchanges are nowhere near as valuable as those you can earn at other sports betting sites. Most exchanges offer a sign up bonus, and they usually have loyalty schemes too, but the sums of money involved just don’t compare. This is entirely understandable really, as exchanges make far less profit per customer on average than sports betting sites.

Top Tip:

If you use betting exchanges primarily to take advantage of the better odds, you should calculate whether the better odds make up for the loss in bonuses and rewards. It’s important to make sure that you’re always betting where you can get the best overall value. If you’re utilizing the other benefits that exchanges have to offer, than this issue isn’t as big of a deal.

The second disadvantage of using betting exchanges is that you’re not always guaranteed to place your desired wagers. A bookmaker or betting site will almost always take your wager, up to a maximum stake, but that’s not the case when exchange betting. You’re reliant on there being someone willing to take the opposite position to you at the appropriate odds. Although this isn’t usually a problem with the mainstream betting markets, it can be very frustrating when your wagers don’t get matched. And it IS a regular issue when betting on the less popular markets.

These disadvantages are certainly something to take into consideration, but neither of them should deter you away from exchange betting altogether. The advantages clearly outweigh the disadvantages.

Tips & Advice for Exchange Betting

There are many sharp bettors who make good money using betting exchanges. Nothing’s guaranteed though, of course. Successful exchange betting requires skill, commitment, and patience. The same goes for any kind of betting. If you want the best chance of making money yourself, you need to take the right approach. The four tips below will help you do exactly that!

  • Don’t use exchanges exclusively
  • Always look for the best option
  • Be wary of laying at high odds
  • Learn exchange betting strategy

Although we made it clear that the advantages of exchange betting outweigh the disadvantages, our first tip here is to use exchanges AS WELL as traditional betting sites rather than instead of them. There will be times when it’s right to use an exchange, and times when it’s right to bet in the traditional way.

This is why it’s also important to follow our second tip. Always consider where the best value is, as the obvious option isn’t always the best option. For example, in some circumstances it might be better to back multiple selections rather than lay a single one.

Our third tip is a vital one. You MUST remember that laying means you have to pay out at the agreed odds. If you’re laying a very unlikely selection, the odds are going to be high. So you’ll be risking a lot more than you stand to win. This is rarely worth it. Even if this selection has a very little chance of being correct, there’s always a possibility that it will be.

Our forth and final tip should be obvious. In order to make money with exchange betting, you have to be willing to learn and apply some betting exchange strategies. These are very different to the strategies we use when betting on sports in the traditional way. We won’t get into that here though, as we’ve written a comprehensive article dedicated specifically to this subject.