How People Make A Living From Betting Exchanges
Few things have had an impact on the world of betting quite like the introduction of exchanges. Rather than needing to turn to a bookmaker in order to place a wager, exchange users can place bets peer-to-peer with other punters, which changes everything. If you’re hoping to place a bet at specific odds then you’ll be able to do so, as long as there is someone out there willing to take you up on the odds being offered. On top of that, exchanges take a percentage of winning bets, so they don’t care how much you win or what you bet on.
This means that bettors will rarely have their accounts limited, which isn’t the same attitude that bookmakers have. For professionals, the invention of the exchange has been a huge thing, allowing them to back an outcome in advance of an event, then lay it when the odds shorten in order to give themselves the best possible chance of making a return. Of course, the reality of betting is such that there is never a guarantee and they need to have a large bank roll as they will lose money at times too.
What Is An Exchange?
First things first, let’s have a look at what an exchange is. There are numerous different companies that offer betting exchanges to online punters, with Betfair probably being the most famous. In essence, exchanges allow bettors to place wagers against one another, as opposed to with a bookmaker.
Punters can either offer odds or request odds from others and place their bets accordingly. Traditional bookies have an Edge built in to their odds, ensuring that they always profit, whereas the exchange takes a percentage of winning bets. As bets are peer-peer matched it means there will always be a winner from a matched bet and the exchange will always make a guaranteed commission return.
Perhaps the biggest difference between exchange betting and bookmakers is that exchanges allow you to take part in Lay betting. This means that you’re essentially backing a selection to lose rather than to win. Imagine a world in which you’re betting on a horse race with ten horses taking part.
With a bookie, you’d choose the horse that you think will win and make your bet on the odds offered. On an exchange, you can either pick the horse that you want to win, which is called Backing, or you can Lay it, wherein you’re saying that you think any of the nine other horses will win the race.
You placing a £10 bet at 10/1 for a horse to win a race means that someone else has to be willing to lose £100 and accept the bet at 1/10. If the horse wins, you get their money, if any other horse wins then they get your money.
The key thing to take away from this is that the ability to Lay a bet means that you can guarantee a return if the odds shorten in the period after your bet has been placed. The only way that you could do that with a bookmaker would be to bet on every other horse in the race, as opposed to Laying it after the price has changed.
How The Professionals Do It
The most important thing to realise about betting on the exchange is that those that make a consistent profit know what they’re doing. There is a reason why they’re able to turn professional, or at least to earn enough money to make money from the betting exchange on a consistent basis, and that is down to the bettor in question having a good sense of what options will see their odds shorten over time.
Just as with the stock market, a bet’s value can go up or down, so having a good sense of when a wager will do just that is important.
To put it another way, professional bettors don’t place wagers on markets that they don’t understand. This is where so many fall down when attempting to take on the exchange, placing bets on things that they don’t know about in the hope that maybe the odds will fall.
Imagine you don’t know much about football and choose to place a big bet on Manchester City to win the Premier League title. The likelihood is that those odds are only ever going to shorten, meaning that you won’t be able to ensure you get a return as you’d hoped.
Back-To-Lay Betting
The main method used by professional gamblers to ensure that they make money on the betting exchange is known as Back-to-Lay betting. This technique sees people Back a selection at higher odds, usually well in advance of the event that they’re betting on, then Laying the same selection at a later date if the odds shorten.
By doing this, the punter in question has locked in a return regardless of the outcome of the event. The same can also be done by Lay-to-Back betting, although this tends to be harder to get right and is a bit more complex. That relies on you laying a selection and then waiting for odds to drift out before backing it.
Betting exchanges tend to make it easy to understand what is likely to be the outcome of your bet. Next to each selection available in the market, there is a number in green, how much you’d stand to win with that bet, and a number in red, which indicates how much you’d be likely to lose.
By using these indicators, you can work to Lay a bet at a shorter price that you Backed it or Back something at a longer price than you Layed it. The best bettors also continually adjust their positions depending on how the market looks.
In order to explain it better, let’s imagine that we’re betting on a horse race with Speedy Horse up against Horse With Stamina. Because they both have different skills, they’re well matched and the market has them relatively close to one another.
Speedy Horse is being offered with odds of 3.0 (2/1 in old money), whilst Horse With Stamina has odds of 1.50 (1/2). You choose to place a bet of £20 on Speedy Horse, meaning that if it wins you’ll get back £60, £40 of which will be winnings for you. If Horse With Stamina wins, however, you’ll lose your £20.
Once the race gets underway, Speedy Horse lives up to its name and gets a good lead in the race, meaning that its In-Play odds start to drop on the exchange. Horse With Stamina takes a slight stumble at a fence a few from home, seeing Speedy Horse’s odds come in even further. Because you’re set to win £40 if Horse With Stamina wins, you can choose to place the opposite bet with, say, £40 and ensure that you’ll get a return no matter what happens in the race. Exactly how much you’ll need to bet will depend on several factors, which is why a Lay Bet Calculator is a helpful thing to use.
This is what professional bettors do on a regular basis, often by placing bets well in advance of the actual event. In the immediate aftermath of the Cheltenham Gold Cup, for example, a punter that knows what they’re doing might head on the exchange and place a wager on one of the horses that they think will do well in the event a year later. The fact that it is so far away means that they odds that they’re offered are quite long, meaning that they stand to win if the horse is successful. As the race gets closer, those odds drop, so they Lay the bet to mean they’ll get a return no matter the result.
Thing To Be Aware Of
As you might imagine, not all is simple in the world of Back-to-Lay betting or else we’d all be doing it and guaranteeing ourselves a return. The first thing that you need to be aware of is that people that regularly make a return from the exchange have a large bank roll. They have to put a lot of money at risk when Laying outcomes, so they need to ensure that they’ve got said money in their account in order to cover their risks. That is something that some people will find immediately prohibitive and will stop them from trying to win money that way.
The other major thing that the best bettors do is know when to mitigate their losses. Every punter will lose money, but ensuring that you lose as little money as possible is the key to keeping your bank roll as high as possible. That is to say, you might have placed a bet that you think is a nailed on winner, but as the race, football match or what have you progresses it looks like you’re not going to be winning your wager. At that point, you need to take a loss but not a total loss, which is something that not all punters are good at accepting, but you need to be.
Being successful in the long term using an exchange it is about finding an edge through your own research and using successful backing and laying strategies to ensure you can capitalise from odds movements. It is not always about guaranteeing you win because even with all the research in the world things can go against you you didn’t plan for. At that point it is important to recognise when it is good to get out of a bet by laying the outcome and accepting a loss. That loss won’t be as high as if you let all the money ride.
This is the balance that professionals strike, knowing how to exploit odds to make money and also when to mitigate risk to reduce loses. It is not something that you can do instantly and requires a specific mindset and effort to take the time to understand the markets and how they work.
Odds also move depending on how much money is staked on a market and so you are also in effect in competition with other ‘professionals’, some of whom use AI to track changes in odds to help them define when to back and lay. This can mean making a living from exchanges isn’t as easy as you might think it is as by the time you bet the odds might have changed again because someone else was quicker than you.
