Betting exchange fixed odds betting
Welcome to the Lets Compare Bets guide to betting exchanges. The subject of betting exchanges and fixed odds betting is massive. We have decided to narrow down the topic. We will talk about the Betfair betting exchange in more detail. We have chosen Betfair because a betting exchange must have lots of participants to be effective and Betfair is the biggest betting exchange. See below for a table of contents to our betting exchange guide.
What is a betting exchange?
Betting exchanges allow members to exchange bets. That's the unique bit, members can trade bets, and the trading aspect is similar to a stock exchange. Participants buy and sell something, which in this case just happens to be a bet. The price is the odds of the bet. Flutter.com was the first to come up with the idea and Betfair.com took the idea and added bells and whistles.
The betting exchange website is powered by clever technology acting as a broker between members who want to offer their own odds (like a traditional bookmaker) or accept someone elses odds. If you back an event on a betting exchange, like with a normal bookmaker, you are accepting someone elses odds.
How do betting exchanges differ from fixed odds bookmakers?
One of the only major similarities between a betting exchange and a fixed odds bookmaker is that both promote fixed odds betting. However, the main similarities end there.
As mentioned previous a betting exchange is similar to a stock exchange. The commodity being traded is a fixed odds bet, rather than shares or stocks. The bets on a betting exchange are priced as fixed odds.
The concept is great because in practice it lets market forces take hold. As a result the odds are very competitively priced. The betting exchange completely 'side tracks' traditional bookmakers. Leaving just you, the exchange and the 'other guy'....or gal, sorry ladies. Betting exchanges don't act as a charity, they make their money by charging a percentage commission on the winnings.
One other point is that a betting exchange must have lots of active users and needs liquidity. The same way a stock market needs to have people buying and selling shares. For example, some markets on Betfair.com have far more participants than others. This is important, for various types of Betfair trading such as scalping on Betfair, a type of sports arbitrage betting, or horse lay betting. These types of Betfair trading rely on lots of movement in the price of bets.
A disadvantage of the betting exchange is that some markets do not have high liquidity. As such it is not possible to bet with high stakes. Horse racing and football markets tend to have good liquidity. However, for really high stakes a normal bookmaker is the best place to bet.
Gamblers whose betting activities have traditionally been restricted by bookmakers (normally for winning too much money) have found betting exchanges to be a gold mine since they are now able to place fixed odds bets of a size unrestricted by the betting exchange - the only restriction is that one or more opposing customers need to be willing match their bets.
See our odds tutorial where we explain betting odds. Learn about fractional odds, decimal odds, and moneyline odds.
Use a betting exchange to be your own bookmaker
Matched betting or betting exchanges are unique because you can offer your own odds on sporting events. As long as there is someone willing to accept your odds you'll now be your own bookmaker. With the Betfair betting exchange the consumer dictates the market bypassing the bookmakers. Do you want to deal direct with other sports fans?
Laying an outcome
So how does a betting exchange let you become your own fixed odds bookmaker?
Betting exchanges offer the opportunity to lay outcomes, which is to bet that something will not happen. That a horse will lose or a football team will not score more than 2 goals. This is great for sports betting.
The lay bet is the position fixed odds bookmakers take when offering a bet for somebody to back that the participant will win. For example, if someone thinks Team A will win a competition, he may wish to back that selection. A fixed odds bookmaker offering the punter that bet would be laying that selection; the bookmaker wants to make money if they loose.
Put yourself into the bookmaker's position. You want to win money if your horse or football team lose. You are offering odds on that event. Your odds have to tempt another member of the betting exchange to back that horse or football team. The two parties will agree the backer's stake and the fixed odds. Namely, an exchange of bets.
Using football fixed odds betting as an example. As a budding fixed odds bookmaker you may know that national pride may often lead a sportsbook betting fan to have an inflated opinion of their national team. This will often present a laying opportunity (where you offer other members odds for the team to win) because you will be able to offer longer odds on the event and still get your lay matched because people wrongly believe their beloved team are better than they are! If their team loses, the layer/bookmaker (you!) keeps the backer's stake. If the team wins, the layer will pay the backer winnings based on the fixed odds agreed. As every bet transacted requires a member to back and lay. The exchange is not part of this transaction.
The layer is always simply backing the opposite outcome. Laying the home team is the same as backing the visiting team to win or draw. Laying one horse in a race is just the same as backing all of the other horses to win.
A picture has been posted below showing a section from Betfair.com to show how a Betfair lay bet would look.
Here you can see two columns. If you are backing a Ryder cup winner the odds available to you are on the left (decimal odds inside the boxes). The longest odds are closest to the centre. If you want to lay a position, you need to look at the columns on the right hand side in pink. If you click on a pink box for a Betfair lay bet, an area opens to the right of the fixed odds betting table. See below
Here you choose the price you want to take, and how much you are prepared to risk. The shorter the price you wish to lay, the less money you have to risk compared to your potential reward. Laying the Tie in the market below at 13.5 might sound safe, but for every £10 you want to win, you have to risk £125 - high risk and low reward.
Who is the biggest betting exchange?
The Betfair betting exchange is the biggest betting exchange online. The Betfair betting exchange thrives on liquidity. Customers tend to focus on the betting exchange where they are confident their bet can be paired up with a matching counterbet.
Unsurprisingly, Betfair's success has attracted a number of rivals in the betting exchange market - the most successful of which is Betdaq. Unlike Betdaq, with Betfair, if you are offering you own fixed odds your stake does not have to be matched in full. For example, on Betfair.com if you offer Arsenal to loose the London Derby and you put up £1000 and only 2 punters will accept your odds, betting £100 in total, your bet is still valid.
How can we profit from fixed odds betting on Betfair?
The Betfair betting exchange has opened up a huge fixed odds betting markets. Befair is a popular betting market. Various betting strategies exist making it possible to profit from Betfair betting. These include, types of sports arbitrage betting like scalping on Betfair and trading steamers and drifters on Betfair. Scalping is a type of sports bet trading designed to profit from small movements in odds over a short time frame. Whereas, betting on steamers and drifters works over longer time scales and involves a bigger move in the underlying odds.
Another strategy, horse lay betting on Betfair, involves laying horses to lose (or backing that a horse will lose) in order to produce consistant returns.
Betfair has opened it's application programmer interface or API to third party software developers. What this means for mere mortals is that now there are a range of software providers offering an enhanced interface for Betfair. The developers have produced a whole range of innovative features, indicators and tools to enhance betting on Betfair. One example, is Fairbot, Betfair trading software from Binteko Software, which has a hedging function called 'smart bets'. This function caluculates the stake for a corresponding arbitrage (no risk) trade. A handy feature that allows the trader to profit from a selection no matter the outcome.
Those will sufficient funds could price up their own sportsbook on a number of events and act just like a traditional bookmaker.