Article from Juicestorm Betclub.

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A guide to using betting exchanges for the complete novice.
Learning how to use a betting exchange is essential if you are going to do matched betting. These look completely different from an ordinary bookie and can be quite daunting at first, although in reality once you grasp the concept they are extremely easy to use.

Like bookmakers, betting exchanges often offer free bets to new customers. Please do not rush off to open an account at a betting exchange until you have found out how to take advantage of these.

Differences between exchanges and bookies
Betting exchanges have several significant differences from ordinary bookmakers. Probably the most important is that you are not betting against the bookmaker, but against another person with the opposite opinion to yours. You can bet on something either to win or to lose. The betting exchange makes its money from charging commission on bets, not by providing the odds as normal bookies do. It is essential to understand the way this works – odds are provided by other customers and you can only take the money that is there. You can queue for more or for specific odds, but there is absolutely no guarantee that you will get what you want. You can cancel or move bets as long as they have not been matched – once matched they are fixed and you can’t cancel them. You can, however, place an opposite bet to effectively cancel something out. Unlike bookies, betting exchanges do not care if you bet on every selection in the same event or back and lay the same thing.

There are other minor differences, most importantly some of the rules for betting on different sports are not the same as the bookies. This can lead to difficulties when laying off a bookmaker bet at an exchange in situations such as a mid-match retirement in tennis, when you can lose both sides of your matched bet if you are unlucky. This is why you are advised to stick to football for matched betting until you understand the implications of these rules.

Odds
At a bookmaker you will often be offered the fractional odds or their decimal equivalent, and if the odds change the difference is quite a large amount, eg 9/4 (3.25) will drop to 2/1 (3.0). At a betting exchange the odds are displayed as decimals and have standard “tick” sizes (although these may differ slightly between the different exchanges), typically 0.01 intervals at very short odds, rising to 0.02, 0.05, 0.1, 0.2, 0.5, 1.0, 5.0 etc as the odds get progressively bigger. For the example quoted, you are likely to be able to bet or lay at 3.0, 3.05, 3.1, 3.15, 3.2 and 3.25. Also the odds are much more fluid at a betting exchange than at a bookmaker, they generally move rather faster and can go up or down or into reverse with no apparent logic as people place their bets. In general the nearer you get to the start of the event the more volatile the odds become. Betting exchanges also give people the option to back and lay in play on some events. The odds in play are extremely unpredictable and bets are subject to a delay before they are placed, making in play matched betting or arbing extremely difficult. You are advised to avoid this except in exceptional circumstances (eg a free bet which can only be placed in play) and even then you need to be experienced and confident before you try it. Inexperienced matched bettors are advised to look for bets at least a couple of hours before the event starts, as the odds will be more stable, allowing you to take your time and use the spreadsheet without pressure.

Commission
Betting exchanges charge commission, usually on your winnings (not on your stake, like the old betting tax used to do), and usually starting at 5%. This needs to be factored into any calculations before you place your bet. The back odds at the exchange may look bigger than the bookies, but are they really after 5% has been removed? Similarly if you are trying to make a profit from arbing, taking higher odds at the bookie and laying lower odds on the exchange, commission can mean that the lay odds at the exchange are higher than you think. This is one of the reasons why, when matched betting, you need to use a spreadsheet to work out the correct amount to lay, otherwise you can get a nasty surprise if your lay bet wins.

Backing and Laying
Commission aside, a back bet on an exchange works in the same way as a back bet at a bookmaker. A lay bet is a little more difficult to understand because the concept is less familiar. If I back £25 at 11.0 (10/1) and it wins, I win £250. If it loses I lose £25. If I lay £25 at 11.0 exactly the opposite happens. If it loses I win £25, and if it wins I lose £250. You can therefore immediately see that laying is very much more risky than backing if you do it at high odds, because you can lose much more than your stake. The amount you can lose (in this case £250) is called your liability. When matched betting you will almost always be placing lay bets on the exchange, and it is important to understand that although your lay stake might be £25, you need to have enough money in your account at the exchange to cover the liability, since this is what you can lose. If the funds are not there the exchange will not allow you to place the bet.

Liquidity
Liquidity is a complex term, the correct definition revolving around the effect your bet has on the movement of the market. However, in simple terms you can think of liquidity as being a measure of the amount of money which is being bet on that event. In general the bigger events such as premiership football and UK racing will have much more liquidity than obscure football leagues and races in Australia or America. You can assess this by looking at the amount matched, and at the amounts of money shown below the odds on each selection:

Screenshot 1 – Tottenham v Liverpool

Screenshot 2 – Aves v Trofense

These 2 screenshots are for football matches played on the same day, an hour apart. The first is a high profile premiership game with plenty of liquidity (over £600,000 matched on this market). The second is a lower league Portugese match with very low liquidity (only about £3,200 matched). It is immediately apparent that there is much more money on the premiership match, with thousands available to match at each price, while the Portugese match has big gaps between the offered back and lay odds on each selection and single figure sums on many prices. Remember you can only take what is there – if you were to bet on Aves in the second of these and the £32 at 2.52 was taken before you could place your lay, there would be no guarantee that you could match out at anything like a decent price. If for some reason the £3000 on Spurs disappeared while you were lining up your bet (unlikely), you have another £7000 to play with at 2.2.

There are 2 good reasons for avoiding obscure, low liquidity events. The first is the very real risk that you will not get your bet matched at the odds you want, and the second is that bookies are more likely to notice you and regard you as a matched bettor if you go for an obscure football match because it has the best odds. They are very sensitive nowadays and can limit your account if you bet on the “wrong” thing.

Placing Bets
To place a bet you click on the odds that you want to take. If you click on the right hand (higher) side, you will be placing a lay bet, if you click on the left hand (lower) side you will be placing a back bet. You then enter the stake and when you are happy you submit your bet. You can adjust the odds when you have loaded a betslip. If you place a back bet at lower odds or a lay at higher odds than are currently available, you will get the best odds at the time. If you ask for odds which are higher (for a back) or lower (for a lay) than the current price your money will be placed in the queue, and matched on a first come first served basis. If your bet is unmatched you will see your money appear on the opposite side to where you clicked:

Screenshot 1 – before I bet

Screenshot 2 – my unmatched bet

Here you can see in the top screenshot that there is no money on Trofense at 4.0. I place a back bet by clicking on one of the blue prices, then changing the odds to 4.0. When I submit my bet you can see in the second screenshot that my £2 is now waiting at 4.0. Similarly I could click on a purple price, lower the odds and queue for a lay bet at a lower price. This is not recommended for matched betting – you can never be sure which way the odds will move. However it is useful if you want to trade – see below.

Betfair
The biggest and most useful betting exchange is Betfair. For simplicity all screenshots in this guide are from Betfair. Other betting exchanges operate in a similar way, although the colours and layout may be slightly different.

Because Betfair is so important, and is a complex website designed for a variety of types of customers, on Betclub we have detailed guides to setting up and using Betfair for matched betting.  These show you how to place a bet and what happens when it is matched or unmatched.

Other Exchanges
The second biggest exchange is Betdaq and its “skin” Betmate, which is the same thing in a different colour. Betdaq can be useful both for the occasional market which Betfair does not have, and as a backup in case Betfair isn’t working for some reason. Confusingly Betdaq shows its back odds in pink and lay odds in blue – you need to remember that the lower ones are money available to back and the higher ones to lay.

There are other exchanges, including WBX and ibetx (most betting sites with x at the end are exchanges) and bookmakers are beginning to jump on the bandwagon and open an exchange themselves. The main problem with all of these, including to some degree Betdaq, is the lack of liquidity. Everyone knows that Betfair is the biggest exchange, and therefore they tend to go there first, so Betfair has most of the liquidity. This situation is self perpetuating – it is extremely hard to break into this market because you need a load of liquidity before anyone will look at your site.

Trading
Not everyone using Betfair is placing just one side of a bet. One of the things you can do is take advantage of the market movements to back and lay at different times at hopefully advantageous odds, and pocket the difference. This is not as easy as it sounds – you are backing your judgement about the way in which the market will move. It is possible because commission is charged on your overall profit on the market, not on individual bets. Being able to queue for a price is extremely useful in trading, and various types of software have been produced which enable you to place bets faster and more efficiently than you can on the exchange websites. We have plenty of videos and guides to trading on different sports at Betclub in the trading part of the Help and Guides section and also in the trading section of the Strategy Library.

Small punters get better prices out of it. If the market is 100.5%, then they’re getting a fair price on their money.

Using market information is what every bookmaker does every day of the week in virtually every market he prices up. Momentum traders are doing nothing else.

You can’t expect to get the same price on a betting exchange as you do at the bookies on every selection. That applies to every sport not just horse racing.

Many have noticed the lack of early priced horse racing turnover has nothing to do with momentum traders. The market has evolved and reached it’s equilibrium. People have found out that sticking larger offers up across the board costs them money overall, so they have curtailed the amounts to fit in with demand at that point in time. Horse racing suffers more than most because it’s harder to determine the correct price and because of the genuine fear of inside information. You’ll also find that most successful traders are not momentum traders and are very opinionated.

Traders are very keen on the economics of movement towards the market equilibrium, but what about the economics of giving away something for nothing? Informed tissue-makers (if they want an early bet in size) have in effect to give away their pricing for scant chance of being matched.

Of course, traders either drip-feed or have to wait until closer to the off. Is the same amount of money matched in effectively the only market as it would be in early/evolving, than late markets? Not necessarily; often, the price has moved past the point where the opinion players want to play. The winners in the fight for the late money may be predominantly technically oriented, rather than judgment-based gamblers.

Technical traders winning is equally merited and their strategy equally legitimate. But what about a style-neutral interface? Momentum / WOM bots can take from losers as they do at the moment (typically by some sleight that involves putting up a worse offer than is likely to be immediately available), and tissue-makers can take from losers in having them blunder into out-of-line bets? Why should penny-size traders be able to play in the early markets to the exclusion of traditional big winners?

The answer may be it’s the market we operate in. Late money is found to be the most accurate prediction of true outcome probabilities and the greater the late odds movement in an entrant, the higher its probability of winning. Simply, bet late and bet often.

Well, that’s it from me today. Stay safe, wherever you are and good luck to you all as always.