This very much is a learning curve I am still on as a bettor, as I don’t use exchanges anywhere near as frequently as I should.
I will try and explain how they work in the simplest terms I can. With an exchange you can choose to back or lay a bet. Backing a bet is simply like any normal bet with a sports book in which you are saying this will happen. For example Real Madrid will beat Barcelona, but the beauty of the exchange is you can actually adjust the price to your liking. So say you think conventional bookies are being far too stingy with their margin worked into pricing Madrid up at 1.8 (4/5) and you fancy them to win, but want a better price, you can actually pick your own price. For example 2.0 (1/1) and providing somebody matches the bet you will have taken the bet at a much better price than on offer in the bookies. If somebody doesn’t match your bet then of course your money will be refunded. So keep an eye on if your bet has been matched when placed. A bet being matched is effectively just somebody else on the exchange that believes Madrid wont win today so is happy to lay them off at the price you requested.
Laying off is basically the opposite to a conventional bet as you are betting something WILL NOT happen as opposed to betting that it will. This is the basics of all bookies. You approach one saying you think something will happen, they tell you the price they feel it will and lay the bet as if the outcome you want doesn’t occur you lose your stake and they win it. If you lay a bet you have something called liability so in the same way a bookmaker does if you lay a bet and the outcome you laid wins you will lose and have to pay out everyone who matched your bet and backed the price you offered. For example say you laid Arsenal to beat Nottm Forest in the FA Cup at 1.5 (1/2) and somebody matched it and backed £10 on it. If Arsenal go on to win in 90 mins you would be liable for £5 and have to pay out the £5 to the person who backed your bet, whereas obviously if Forest win or draw you win the £10 they staked on the game. This is why as a general rule people prefer to lay bets at odds on as their liability is lower than their potential winnings. As if you laid Forrest at 3.5 (5/2) and somebody has a £10 bet on it if that loses you would owe them £35 which would be £25 profit for them so your risking £25 in order to only win £10 if Arsenal won.
The exchange allows you to become your own bookmaker in effect by backing and laying outcomes at prices you want rather than being told the price it is. Because the exchange doesnt build an over round or a margin into its prices you will find much better value here. Of course as every business needs to make an income, exchanges do charge you a commission on winning bets, so any bet you win they will take 5% as their cut for example but if your clever about it you can work their cut into your requested price so even if it wins your still going to make more money than you would betting the outcome on a sports book even after paying commission.
Now not every single bet type thats available with a bookie is available on an exchange and multiples quite often aren’t, but for single bets on a magnitude of sports markets, it will more often than not work out more profitable to back on the exchange.
Now exchanges allow you the capability to do something called arbitrage betting in which you can take prices from sports books and lay off the opposite outcome on the exchange to therefore make a small cut in the middle regardless of outcome but I DO NOT recommend you do this as its heavily frowned upon by bookies so your accounts will soon be gubbed (closed) or heavily restricted and therefore isnt worth it in the long term. So I wont discuss it further.
The two main exchanges I would look to use are Betfair which has its own sports book and was the first exchange of its kind and Betdaq which is now part of the Ladbrookes/Coral group so also is linked with a sports book.
As it is with conventional betting with a bookie, shopping around for the best price is always a good thing to do as different exchanges will have different levels of liquidity on different markets. (liquidity basically means money placed on that market) So obviously more obscure events are much less likely to have your bet matched due to the lack of money or liquidity, whereas a Premier League fixture will always have a high levels of liquidity due to the colossal amounts of money backing and laying the game. As I have mentioned before, exchanges also add further options to you when looking to mitigate your losses or hedge your bets as you can look to lay an outcome off in-play at a price of your choosing providing it is matched, if you already have a backed bet either on an exchange or a sports book.
Hope this makes exchange betting a little more clearer as I have been betting for 10 years or so and I still fully don’t understand them.
The Percentage Game 