What is the Betfair Exchange? A brief overview
Betfair is the most popular betting exchange in the country but what is a betting exchange? An exchange allows you as the punter to become the bookie. You can set your own odds for any event and see if anyone wants to take your offer. Users can also place traditional back bets but by placing a lay bet they are essentially acting as the bookie.
All the money that is exchanged is that of Betfair’s customers. They make money by charging a 5% commission on all winning bets.
There are a few other exchanges to choose from such as Smarkets. They offer a lower commission than Betfair but quite often there isn’t as much money in the market (also know as liquidity) so it makes it more difficult to get your lay bets taken, or matched as it is known.
Betfair was created by British businessman Andrew Black. In 1998 he developed the idea for people to be able to place bets in a different way. His idea was simple, allow customers to be able to bet against each other and therefore bypass the bookmakers. At the time there was no other company offering a way to do this.
Black brought in another businessman called Edward Wray and the two formed a company called The Sporting Exchange Limited. Two years later the betting platform was launched and Betfair became the world’s first betting exchange.
It’s first betting market was on the Epsom Oaks, a horse race won by Love Divine.
Betfair grew slowly at first as it was seen as complicated and only understood by sophisticated gamblers who understood how betting worked. Betfair have worked over the years to make the betting process as easy to understand as possible and today it is one of the largest betting companies in the world.
Backing and Laying
At first glance Betfair can look extremely complicated and daunting for the first time user. However it really isn’t that difficult to understand once you know what you are looking at.
You are probably already familiar with a back bet. This is exactly the same as placing a bet with a bookmaker. We are backing our selection to win. The way Betfair differs from the traditional bookie though is that you can choose your own odds. Usually with a bookie you are limited to betting on the odds they are offering. However with Betfair you can set the odds you want to back at. There is no guarantee your bet will get matched but if it doesn’t your stake is returned to you.
On the betting slip you can alter the odds in the same way you alter your stake. Set it to whatever you want and click place bet. Then just wait for it to match.
If you are happy to take the odds on offer though just click the blue box on the betting ladder and then enter your stake.
A lay bet is no more complicated than a back bet. A lay bet is essentially placing a bet on something not to happen. When we back a horse we are saying, “I think this horse will win”, but when we lay a horse we are saying, “I don’t think this horse will win”.
A lay bet essentially makes you the bookie.
When we place a lay bet and it wins we win our stake however it if it loses we have to pay out. So if we place a lay bet of £10 at 10.0 our potential losses are £90. This is known as liability. So in order to place this bet we would have to have £90 in our betfair account. This money is then tied up until the bet is settled. If your lay bet wins the liability is returned to you along with your £1o profit. If it loses then the liability is lost.
Betfair betting screen explained
Let’s take a look at the betting screen as we would see it on Betfair and then break down what each part of it is about.
- The Price ladder. This is often what puts people off using Betfair, all those odds and numbers look confusing. Essentially though the white boxes show bets that are queued to be matched. If you select one of these white prices you are entered into a queue for your bet to be matched.
- Blue box. This is the current back price. We can take this price immediately for a back bet.
- Pink Box. The current lay price. We can take this price immediately for a lay bet.
- Cash Out. We can cash out our bet at any time after we have placed it. Depending on whether the odds have moved it may result in a profit or a loss.
Other things to look our for:
- Going in play. This means that the event will soon enter an in play status and the even will be under way. Any unmatched bets will automatically be cancelled at this point unless you tick the “keep” button when you place your bet. Keeping the bet will keep your bet in the queue to be matched once the event is underway. Particularly useful for horses where the prices change dramatically once the race starts.
- Matched: This figure shows the amount of money that has been matched as a bet for all users. It isn’t really important but it let’s us see how popular an event is at any one time.
- Back All. Clicking this will allow you to back every selection in the event.
- Lay All. Clicking this will allow you to lay every selection in the event. Can be great for making a lot of money but if an outsider wins you could be looking at a big loss.
You may have heard of trading before. This is essentially the same as what a stock broker does on the stock exchange. They buy shares at a low price and then sell them when the price goes up to make a profit. Often they will buy and sell them within a few minutes or hours.
Trading on Betfair is exactly the same. With Betfair trading we want to Back High and Lay Low or Lay Low and Back High.
An example of this would be us backing England for £20 to win a football match at odds of 4.0 – after 70 minutes they are 2-0 up and the lay odds come right in. The chances of England losing from this position are slim. We can trade our bet at this point though for a guaranteed profit. We can use the TrickyBet calculator to see how this might potentially work.
So because England are winning the lay odds have come in to 1.5, using the calculator we can calculate that if we lay £55.17 we can lock in a £32.42 profit if we lay this bet now.
If you have ever cashed out a bet at a bookmakers then you have unknowingly traded a bet. If you backed England to win a football match and after 70 minutes they are 2-0 up the odds on them to win will have come in dramatically. The bookmaker will offer you the chance to cash out there and then and take a profit. This is great if we are worried that the other team will come back and equalise but the value of doing this is very poor. The bookmaker will not offer you the full market value of the trade.
By laying the bet on Betfair we can take the full market value and therefore get a much higher profit.
A great way to get into trading is with dobbing which I have talked about in more detail previously. Here are some other easy ways to get into trading on Betfair.
Lay The Draw
This is a very popular way to trade and probably the most common way people trade a football match.
The tactic for this is simple. Before the game starts we lay the draw. Once the game gets under way we wait for a a goal to be scored. At this point the price of the draw will go up meaning we can now back the draw and lock in a profit. Lay low, back high.
Obviously we need to pick a game where we think there will be goals. If the game ends 0-0 we will lose our lay bet although it will be possible cash out for a smaller loss at any point if you think the game is heading that way.
Trading Free Bets
By trading free bets we get from the bookmakers we can lock in a profit every time. This is known as matched betting. It’s a great way to make long term profits from the bookie. With a free bet we can usually extract around 80% of the free bet value regardless of the result. We can also lock in our profit before the event starts and unlike other trading methods we don’t need to wait for the odds to move in our favour.