Since the introduction of betting exchange sites like Betfair eleven years ago, the world of sports betting has been completely revolutionised. However, a great many people still can’t get to grips with the exchanges and are missing out on all the benefits of this innovate and vibrant betting arena. If you fall into this category and want to learn about betting on the exchanges, read on.

Fractional Odds
Betting exchanges differ from standard sports betting bookmakers in many ways. The most obvious, if you are a British sports bettor, is the way in which the odds are presented. Decimal odds are popular throughout the world, but for some reason they are yet to catch on with the wider British betting public.

Decimal odds are actually far more straightforward to understand than fractional odds, which is why they are used by the betting exchanges. If you place a £10 bet at odds of 12.50, you simply multiply the two figures to get your total returns (i.e. your profit and stake combined) – in this case, £125 – what could be simpler?

To convert fractional odds into decimal odds, divide by the bottom number and add 1. For example, 6/4:

  1. 6 / 4 = 1.50
  2. 1.50 + 1 = fractional odds of 2.50

Backing and Laying on the Betting Exchanges
So now that we can understand decimal odds, we can start to look at how to use betting exchanges in more depth. Another major difference between a standard bookmaker and the betting exchanges, is the ability to lay, as well as back.

“Backing” is the term used for placing a bet on a selection to win, exactly like when you place your bet at the likes of William Hill. “Laying” is the term used to describe what the bookmaker does – effectively, it is backing a selection to lose, or “not to win”.

Let’s expand on that point a little more. Imagine a football match, let’s say Team A against Team B. There are three outcomes to the match – Team A wins, Team B wins or the match is drawn. If I back Team A, my bet is a winner only if Team A wins the game. If Team B wins or the match is drawn, I lose my bet.

If I were to lay Team A, I would lose my bet if Team A wins, but I would win my bet if the match was drawn or if Team B were to win. Laying is the role taken on by a standard sports betting bookmaker, when you place a bet.

Why is this important?
The ability to both back and lay is a massive advantage to sports bettors and it is this difference that makes a betting exchange preferable to a standard bookmaker. There are two main reasons for this.

First of all, it offers the sports bettor more flexibility. Imagine that you believe strongly that Team A is not good enough to win their football match against Team B, but you can’t decide whether Team B will win the game or if it will end as a draw. Going to a bookmaker like William Hill is no use in this case, but a visit to an exchange like Betfair allows you to “lay” Team A.

The second benefit of using an exchange over bookmaker, is the value on offer. When you go to a bookmaker like William Hill, you can only bet at their prices. Sure, a clever sports bettor will shop around and might find a slightly better price with a different bookmaker, but on the exchanges there are thousands of different people, with different opinions on the outcome of your chosen sporting event and it is much more likely that you will find someone likely to offer you a better price.

What about trading?
Betting exchanges were given their name by the media, as they are very similar to the stock exchanges. Instead of buying and selling commodities, people are buying and selling (or backing and laying) on the outcome of sporting events. This has given rise to sports trading.

Betting exchanges allow sports bettors to play “In running”, or in other words, you may continue to place bets after the sporting fixture has started. Imagine a horse race, where you backed a horse (£10) to win at odds of 18.00. With a furlong to go, your horse is winning by three lengths but you can see that it is quickly getting tired. It is currently priced at 3.00.

You could simply watch the remainder of the race. If your horse hangs on, you get back £180 (£170 profit) and if it tires and loses, you lose your £10 bet. But here, you have a chance to make a trade. You could now lay your horse at odds of 3.00 and guarantee profit regardless of the outcome. If you offered someone a £60 bet at odds of 3.00, you could guarantee yourself £50 profit.

Your liability on a £60 bet at odds of 3.00 is £120. The player must give you £60 to make the bet and if their bet wins, you give them back £180. £60 – £180 = -£120.

If the horse loses:
Your £10 at 18.00 bet is a loser (-£10) but your £60 lay bet is a winner (+£60) for overall profit of £50.

If the horse wins: Your £10 bet wins (+£170) but your lay bet loses (-£120) giving you overall profit of £50.

Trading on the exchanges is a great way to bet and there are lost of simple trading strategies available to get you started, as well as tools to make trading on the exchanges even easier.

Are there any drawbacks to the Betting Exchanges?
The only downside to betting on the exchanges, is commission. Because sites like Betfair are a third party, bringing all these sports bettors together to facilitate betting, they charge a fee. The fee varies from exchange to exchange, but it usually consists of a small percentage of profits on a bet.

However, this isn’t nearly as bad as it sounds. In the vast majority of cases, the odds on offer at the exchange would have been much higher than those offered by a standard bookmaker, which tends to offset any commission. In British horse racing for example, the Betfair Starting Prices can be as much as 40% larger than the industry Starting Prices used by traditional bookmakers.

What betting exchanges are out there?
Betfair are far and away the largest betting exchange. They were the first exchange to launch in May 2000 and are the dominant company in the field of betting exchanges, with over 35 million bets exchanged per day. This virtually guarantees liquidity in your chosen sports betting market (in other words, it is highly likely that someone will want to take your bet).

Betfair currently offer new customers a free £25 bet and commission starts at 5% (the more you use Betfair, the more your commission charges decrease).

Betdaq is a popular alternative to Betfair and they currently offer new accounts a free £30 bet, with commission starting from as low as 2.5%.

Sports bettors who prefer Betdaq tend to cite the layout of the site as their main reason for continuing to use Betdaq over Betfair, as well as the difference in commission. Betdaq can occasionally lack liquidity on the more obscure sports betting markets.

WBX, or the World Bet Exchange, are another alternative to Betfair, with commission ranging between 3% and 5% depending on the market. They offer new customers a free £25 but can also suffer from the same lack of liquidity as the likes of Betdaq.