What is matched betting?
The betting exchanges
What is a betting exchange?
A betting exchange, such as Betfair, is a place where gamblers or traders (or us matched bettors) can buy “back” and sell “lay” an outcome of a sporting event (much like the financial stock exchange, but think football and horse racing rather than Wall Street), traders can also trade in real-time (or “in-play”) to cut their losses or lock in profit.
Bookmakers make their money by offering less efficient odds for our favourite sporting events.
Betting exchanges offer much more competitive odds and generate their revenue by charging a small amount of commission on winning bets.
So how does a betting exchange benefit us?
The betting exchange is the place we go to when we need to lay off our back bets.
Laying off our bets is what we do to cancel out our back bet with the bookies and extract profit from the bookmaker offers i.e free bets.
This means that when we place a back bet with the bookmaker, we place an additional lay bet with the exchange, using the matched betting calculator. Essentially we are making a bet on the exchange for the opposite outcome of the bet we have made with the bookmakers.
The whole premise of being able to bet against something happening, is exactly how matched betting was born. To be able to place a back bet and a lay bet for the same outcome for guaranteed profit.
We place our back bet for Chelsea to beat Crystal Palace with the bookmakers.
And then we place our ‘lay’ bet with the exchange for Chelsea not to beat Crystal Palace.
Important!!! This does not mean betting on the opposite team, in this case Crystal Palace to win the match, at the exchange. It means specifically betting on Chelsea NOT to win. We bet AGAINST the outcome.
To work out the correct amount to place as our lay bet, we need to use the matched betting calculator.
In our walkthrough guide of your first matched bet, I will show you exactly how to use the matched betting calculator and how we make profit using the matched betting strategy.
Liquidity in a betting exchange is very important and you want to have a fairly good grasp of it before you attempt your first matched bet.
As explained above, when we place our back bet with the bookies, we then need to place our lay bet with the exchange. But at the exchange we are trading with other people, so the bet needs to be on offer to allow us to place that lay bet in the first place.
Let’s look at the example below:
If we look at the horse Brother in Arms above, we can see a figure of £8 just below the lay column at odds of 5.0, this means there is only £8 available to be matched. So if you needed to place a lay bet of more than £8 on this horse, then there would be no guarantee that this bet would be matched and could result in you losing money.
This is why it is so important to check the liquidity of the market before placing either your back or your lay bet.
If the liquidity isn’t there to be matched, then find a different match.
Which betting exchange should you be using?
There are four betting exchanges in existence at the moment, and they all have their uses. You will probably find that you end up using all four of them for different purposes, so it’s not a bad idea to sign up for all four.
Betfair were the first pioneers of betting exchanges and really have stood the test of time. They probably have the best liquidity of all four exchanges and are very much seen as the big boys of the betting exchange world. As a result of this though, they can also get away with charging the most commission of all four, and at 5% per winning bet, that’s really going to start eating in to your profits. They have the widest range of markets with arguably the most liquidity so they are definitely worth using, but there are other exchanges to use alongside Betfair.
Probably my favourite of the whole bunch, they have a decent amount of liquidity, a fairly broad number of markets available that will have you covered as far as matched betting is concerned and at a competitive commission rate of 2%, you’re getting a pretty good bang for your buck. I personally use Smarkets the most as I am currently enjoying 0% commission through my Oddsmonkey subscription.
Matchbook are another fairly decent exchange, the liquidity however is nowhere near as prominent as Betfair or Smarkets, but again there is normally enough there to cover you for most of your matched betting activity. The commission is slightly more competitive again at 1.5% across all bets.
BetDaq are the second biggest exchange on the market after Betfair. They have good liquidity and a broad range of markets. They charge a 2% commission on all bets, the same as Smarkets. However, they currently have a new customer offer of cash back on up to a £1000 worth of commission in your first month paid back as withdrawable funds.
All four betting exchanges serve the same function, to allow us to lay off our bets to enable us to extract profit. There’s no right or wrong one to choose, it really just comes down to which one or two feels the most comfortable to use and which one you can get the best amount of value from.
In the next guide comes the fun bit, signing up with our first bookmaker and making profit from our first matched bet…..