What is a betting exchange?
A betting exchange is extremely similar to bookmakers, with one exception. Instead of betting against the bookmaker, with a betting exchange we bet against each other.
By this we mean if someone, for example, places a bet for Manchester United to win, we can match it by betting that Manchester United will not win.
The ability to bet against a result happening is the most important part of Matched Betting, and you will soon see why as you continue learning more about Matched Betting.
Have you signed up with Betfair yet? If not, click here and signup.
So how does a betting exchange work?
The biggest thing to remember with exchanges is that there are two sides to every bet.
To bet for something is known as a back bet
To bet against something is know as a lay bet.
In Matched Betting we will mostly be using lay bets when we are using Betfair.
Lets take a look at an example below of a soccer match between FC Basel and Man City.
The blue column represents the odds available to back an outcome and the pink column represents the odds available to lay.
If I think Man City will win the match, I would back Man City at odds of 1.35.
If I do NOT think Man City will win, I would lay Man CIty at odds of 1.44.
So in Matched Betting we will 99% of the time be placing our back bets at the bookmakers such as William Hill, Ladbrokes etc and only placing our lay bets at Betfair Exchange.
How do we lay a bet?
Lets use the same example as earlier to show you how easy it is to lay a bet with Betfair.
So we have decided that Man City will be our selection for this particular bet. We will lay our bet in three quick and easy steps.
Firstly, click on the pink box with odds of 1.44. A box as shown below will then appear.
Secondly, enter the lay amount we have calculated in our Matched Betting calculator in the empty space under “Backer’s Stake”.
The liability is the amount of cash you will need in Betfair to cover your bet. The lower the odds, the less liability is required.
And lastly, hit “Place Bets” and wait for your bet to be confirmed.
By placing this lay bet against Man City, we are betting that they will NOT win.
What is liquidity?
If you look below all the various odds in the Betfair Exchange, you will notice monetary values.
For example, the Man City lay odds of 1.44 has $36 of liquidity.
So as we are laying Man City, we can see that there is already $36 in liquidity for that specific market. This means we can stake anything up to $36 for this lay bet and it would get matched straight away.
We need to always make sure there is enough liquidity in the market before we lay a bet, otherwise we will be left with unmatched lay bets. Popular events will always have sufficient liquidity as time gets closer to the kickoff of that event.