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Betting on the exchanges

Ever since his father first handed him a pools coupon as child, Peter Webb has been obsessed with finding an edge. Already a hugely successful sports bettor and trader, he was one of the first customers on Betfair, where he continues to prosper enormously well. Here, he explains to novice readers how to use the exchanges to bet on the horses

The role of betting exchanges in the world of sports betting is simple. Their role is to get people together who want to bet on an event. People like you and I come together on the exchange to place a bet and get them matched at the best available price. No single person makes the odds; it’s just pure supply and demand that sets prices.

When people place bets on a betting exchange, money from both sides is placed up front with the exchange to ensure all bets are honoured and winnings are returned shortly after the event closes. Exchanges make their money by charging commission on any profit at the end of an event. If you lose money the exchanges don’t charge you a thing.

Betting exchanges have revolutionised the way people bet on sports events and they have also revolutionised your chance of profiting on them. Before exchanges came along you were obliged to go to a bookmaker to place a bet. They only let you place a back bet, a bet on something to win. Not only that, but bookmakers would put in a lot of profit margin for his service. On the exchanges there are no middle men and as a result less money is lost. Exchanges also offer an alternative to traditional sports bets. Picking a winning horse out of the 40 runners in the Grand National is tough; picking a loser, not so tough! In old-style sports betting, you could only place a back bet with a bookmaker. On the exchanges you can also place a lay bet, betting on something to lose. Sounds great but exactly how do you place a bet on an exchange?

When you place a back on a betting exchange you are ‘buying’ or ‘accepting’ risk in the market. You are saying that you are willing to lose a preset amount of money in return for a certain reward. To do this all we need to do is point our mouse at the screen and click on either the back or lay price in the middle of the screen on the selection we want to bet on and enter the amount we want to bet. If we clicked on the blue ‘back’ area at 1.62 we would be backing ‘Fongoli’. We would do this because we are expecting it to win. If we click on the pink area at 1.63 in the lay column, we would be laying Fongoli; we are saying that Fongoli will not win. By taking the prices at the centre of the book we are backing or laying ‘at the money’. In other words we are simply taking the best price available at that moment in time. In case you get confused, the exchange puts up a dialogue in the ‘my bets’ area to the right of the market. This explains what you are about to do.

You can see the difference between backing and laying the in next illustration. When you back something with digital odds you are saying “I bet £X that this event will happen. In return I want to receive back X times my stake”. If you backed Fongoli at 1.62 with £100, you would get back £62 profit. The digital odds displayed on the exchange of 1.62 represents your stake of £100 and 0.62 being the £62 pound profit that you demand in return for taking this bet. By backing you are betting for Fongoli to win.

Laying is pretty much the inverse of a back bet, you a betting against something winning. When you lay on a betting exchange you are offering risk to the market. You are saying that you are willing to win a preset amount of money in return for a certain liability. In the illustration you can see that if we lay Fongoli with £100 rather than backing it, we will win the backer’s stake if it loses. If it wins we will have to pay the backer £62. If you think about it you are much more likely to pick a winning lay bet as, on average, in a horse race there are ten runners. Out of those ten runners only one will win and the remainder will lose. If you are laying you have nine potential losers to pick from.

Don’t panic if you don’t immediately understand the odds or the way to bet on an exchange. Most exchanges offer a ‘what if’ tool. Selecting this will allow you to instantly see the result of your potential bet without having to commit any money to the market. Furthermore, minimum bets on most exchanges are £2, so even if you have never bet on an exchange before, the cost of trying or playing around is minimal and I strongly suggest you do this so that you can get used to things. If you visit my Bet Angel site we can offer you a free bet to get things going as well as videos showing you what you should be doing.

If you want to get an edge, one way of doing this is simple: ask for a better price. What I mean by ‘asking for a price’ is offering to back or lay on the exchange at price that is not available. In traditional betting markets asking a bookmaker for a better price would most likely prompt a tirade of abuse, but on an exchanges it’s perfectly acceptable. The reason you would benefit from this strategy is because asking for a slightly better price is quite likely to tip you from market efficiency and break even, into profit. Backing an evens shot at more than evens, is obviously going to be beneficial in the long term.

To ask for a price, we simply visit the exchange and put in the price we require and wait for it to get matched. In this illustration you can see the current price to back Fongoli is 1.67 but we have put a back order in at 1.70 instead. Our back order is now sitting in the market at 1.70 waiting for somebody else to lay it. This is in contrast to just taking whatever is on offer, in this case 1.67. This price is a good 3 percent worse off from our requested price. In other words, you have two prices at the centre of the exchange and those two prices are the best prices that exchange users are currently willing to offer. When you put your order in the market ‘out of the money’ you are relying on the odds to move around a bit and eventually hit your required odds. Three percent may not sound a lot but it soon adds up significantly and can give you an edge.

The odds for horse racing markets are typically very volatile and while this caused a problem in old-style betting markets – as people were never quite sure what price they would get – in modern betting markets it’s an opportunity. By placing your bets out of the money and waiting for them to get filled you can improve the amount of money you get back if you win and that will significantly improve your chances of profiting.


Unmatched bets
Bets that you’ve placed, but are yet to be matched by other exchange users. You can still cancel these bets.

Matched bets
Bets that you’ve placed and that have been matched by other users. You’re unable to cancel these bets.

Cancelled bets
Unmatched bets that you’ve cancelled.

Void bets
Matched bets that have been cancelled by the exchange due to a change in market conditions. For example, bets on a non-runner (in most horse racing markets) are declared ‘void’ and will appear as void bets.

Lapsed bets
Unmatched bets that have been cancelled by the exchange, for example, at the start of an event, when the event changes to ‘bet in play’ status.
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