How do Betting Exchange Sites Work?

Betting exchange sites logos

When you begin your career as a football trader, you need access to a reliable betting exchange which offers good liquidity.

It's an essential part of your football trading toolbox and the platform on which your profit is banked. You'll probably end up trading on Betfair, but it's worth looking at all the options.

Rather than going up against a bookmaker, in order to make a profit on betting exchange sites you have to outsmart other football traders. That sounds like a lot of fun (and it is!) but it's also extremely challenging.

You need to win the battles more than you lose in order to end up with a profit overall and no-one hands their hard-earned money over easily. With practice and experience, however, it can be done.

The trading tools we have developed at Goal Profits give you a massive advantage, but we'll get to that (and the £1 trial).

In this article, I will explain in simple terms:


What is a Betting Exchange?

A betting exchange is where traders can place bets against other sports traders, rather than against the bookmaker, as in traditional betting.

Very simply, a betting exchange allows a user to back (bet for) or lay (bet against) something happening in a sporting (or other) event. One of the main differences of an online betting exchange when compared to a bookie is the chance to trade in-play.

For example, if you place a bet on a football team before the start of a match at a sports exchange such as Betfair, you will be able to change your position during the game.

You will be able to lock in profits or reduce losses as the game progresses and goals are scored (or not).

Another key benefit of online betting exchanges is that they typically offer better odds than a traditional bookmaker, which is vital for a football trader who needs to find the best possible odds for a bet.

In fact, research has shown that betting exchanges can offer up to 20% more value overall. This can make a massive difference to your long-term profit if you are placing a lot of bets.

Finally, you will not have your exchange account closed or "gubbed". Online bookmakers do not want customers who win long-term as it eats into their profits, so they restrict accounts whenever they feel threatened.

Because punters are backing and laying bets against each other, an exchange doesn't mind at all who wins or loses.

Betting exchanges have had a revolutionary impact on the sports betting industry. While some football traders use both bookmakers and betting exchanges to make their money, a growing number are choosing to avoid bookies altogether.


Back and Lay Betting Explained

The ability to back and lay bets is a key difference between traditional bookmakers and betting exchanges.

In the simplest terms:

  • A back bet is when you are betting on something to happen.
  • A lay bet is when you are betting on something not to happen.

For example, if you think that Arsenal are going to win their next home match you could place a back bet on the home win.

But if you think they are not going to win, you could lay the home win. In that instance, your bet would win as long as Arsenal do not win, i.e. if the match ends in a draw or an away win.

By placing a lay bet, you are effectively taking on the role of the bookmaker by offering odds. So if you lay Arsenal, Betfair will find another trader who wishes to back Arsenal at the price you're offering and match the two sides - back and lay.

Let's look take a look at an example of how to lay on Betfair.

Here is the Betfair Match Odds market for England's international friendly match against the Netherlands:

England v Netherlands match odds market on Betfair

As you can see by the odds offered on Betfair, England are the favourites to win this match. In case you don't know already, the back odds on Betfair are listed in blue, while the lay odds are coloured in a rather fetching shade of pink.

With back odds of 1.79, you would win £7.90 for every £10 you choose to stake (less commission).

However, when you are laying a bet you are betting against that outcome.

England v Netherlands lay bet in the Betfair match odds market

The lay odds (in pink) for England against Netherlands in this match are currently set at 1.80.

This means that for every £10 you choose to stake, your lay bet liability is £8. If you lay England and they go on to win the game, you lose £8 but if the match ends in a draw or a win for the Netherlands, your profit is £10 (less commission).

You can back and lay at the prices shown in the market, or you can set your own odds. If you decide that 1.80 is not the right price to lay at, you could opt to lay England at 1.75 instead.

You would not get matched right away as other users would be happily backing at the higher price of 1.79, but the price may move once team news is announced if the market decides that England have become stronger favourites.

The figure shown below the odds is how much money there is in the market. So, in the example above, another £2,800 could be layed on England at 1.80 before the price changes, while there is £514 available to bet on England to win at the price of 1.79.

Backing and laying for profit is how football traders make their money, so make sure you fully understand what you are doing before you start placing your bets on Betfair. Getting it the wrong way round can be an expensive mistake!

We explain back and lay betting very simply, with plenty of screenshots. This is how Betfair football traders back lay in order to make a profit.


Betting Exchange Liquidity

Liquidity is the amount of money available in a betting exchange market and it varies greatly from match to match. When you want to trade out, you need to have someone else offering the price you need otherwise you're stuck.

Match Odds markets tend to have the best liquidity and in bigger leagues, such as the English Premier League, liquidity is never a problem. There is always money waiting to be matched on both sides of the market – back and lay – so you can get in and out of trades whenever you like.

Arsenal v Southampton Match Odds market on Betfair.

In smaller leagues, perhaps English League One, liquidity will not be as good. It may be fine to trade on a Tuesday evening when there are not many fixtures, but at 3pm on a Saturday there will be lots of bigger leagues sucking up the available money.

You may well be able to get in and out of trades with smaller stakes, but you might need to wait a few minutes to be matched. There will be times when a goal will go against you while you wait, so bear that additional risk in mind.

Smaller markets in smaller leagues are even more troublesome. The first half match odds market – known on Betfair as “Half Time” – is not nearly as popular as Match Odds and, therefore, liquidity will never be as good.

Whereas you might get away with the League One Match Odds market on a Saturday afternoon, a Betfair trading system which uses first half match odds will be far more difficult - perhaps even impossible - to trade. If in doubt, stay out.


Best Betting Exchange

Betfair is widely considered to be the best betting exchange. It offers a huge number of in-play football markets and, crucially, market liquidity is better on Betfair than any other exchange at this time.

However... it is certainly worth having an account with at least one other exchange. There are times when Betfair has technical issues, so being able to hedge out of a trade at another exchange could save you a painful (and avoidable) loss.

Once you become a highly profitable trader, Betfair will add a 'Premium Charge' to your winnings. You can minimise this by using other exchanges from time to time and I'll talk more about this a little later on.

You'll find more details about each of the four exchanges below. As well as a Betfair account, I recommend you consider Smarkets for your back-up/alternative.


List of Betting Exchanges

There are four main UK betting exchanges; Betfair, Smarkets, Matchbook and BETDAQ.

The Betfair betting exchange is essential for matched bettors and professional football traders alike. Discover what makes it the best betting exchange.

Betfair takes the crown when it comes to betting exchanges, but the Smarkets Betting Exchange has been a brilliant alternative since launching in February 2010.

Betfair still leads the way, but the Matchbook betting exchange offers a quality service (with just 2% commission) if you’re looking to maximise your profits.

The BETDAQ betting exchange set out to challenge Betfair’s dominance, but Smarkets and Matchbook have since joined the party. Can Ladbrokes finish the job?


Betfair Exchange Commission

Exchanges make their money by charging commission, most often on winning bets only. This is why betting exchanges don't mind winning punters, it's really doesn't matter to them who wins or loses.

Very simply, when you make a net profit in a Betfair market, you will be charged a commission.

For example, if you back a home win and the game ends 1-0, you will be charged a percentage of your profit. However, if the game ends 1-1 then you will have lost your bet and there will be no commission to pay.

Taking it a step further, if you back a home win and decide to "green up" the market at 1-0 to protect your profit, then you will be using some of your potential profit to cover the other outcomes in the Match Odds market.

Your net profit at the end of the game will be lower and, therefore, you will pay less commission.


Betfair Premium Charge Explained

You may be aware of an additional Betfair tax on winnings known as 'Premium Charge'.

According to Betfair, only around 0.5% of people with an account are affected by Premium Charges, but considering millions of people use the exchange this could still work out to be a significant number.

"The charge simply applies on accounts which make a persistent profit and meet a certain criteria," says Betfair, but the Premium Charge has been a very controversial introduction.

You will be considered as a potential payer of the Betfair Premium Charge if your account matches the following conditions.

  • Firstly, your account is in profit over the course of its lifetime.
  • Secondly, that the total charges generated by your account are less than 20% of the gross profits you have made.
  • And thirdly, that your account has been used to bet on 250 separate exchange markets.

If your account meets the above three conditions, there is a chance you will be deemed eligible to pay the Premium Charge and you will be informed by Betfair.

A frustrated man banging his head against his laptop computer.

Firstly... don't panic!

You're only going to pay Premium Charge if you're winning big on Betfair and it's considered by many to be an achievement.


How to Avoid Premium Charge

Betfair Premium Charge avoidance is a controversial subject.

  • For some traders, Premium Charge is a sign of greed for a company that is virtually certain to make profits due to its status as the leading betting exchange in the UK.
  • However, others believe that it deters market makers from using automated bots to siphon profits and that it is only fair for those with extremely profitable accounts to pay more.

Whatever your view, remember that betting profits in the UK are tax-free so paying 20% when you're making money on the exchange is not as big an issue as many try to make it out to be.

The one way that I recommend to avoid paying Premium Charge - or at least to reduce the amount payable - is to use different exchanges whenever you can.

Some will suggest finding arbs in order to reduce profits at Betfair, but this takes a lot of time and you will soon find that your bookie accounts are closed or gubbed. It's only a temporary solution and not worth the effort; you're much better off spending the time on your football trading.

It has also been suggested that you could use multiple Betfair accounts, however this is strictly against Betfair's terms and conditions. They have a dedicated team who investigate and suspend suspicious accounts, so you would have to go to great lengths in order to evade detection. It's not worth the risk, so don't be tempted to try this.

Remember... this only applies to a very small number of Betfair traders, so don't worry about it!


Making a Living on Betfair

Yes! It is possible to make a living by trading on Betfair.

I'm not going to pretend that it's easy (anyone who tells you that is lying) but with enough practice and determination you can make it happen.

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