The Betfair exchange markets have been around for a long time now. When Betfair launched in 2000, it was a whole new concept for sports trading.
In this beginners guide to betfair trading, we aim to show trading strategies and how the exchange markets work and function.
Eighteen years on there are still an enormous quantity of people that have no idea how a betfair trading exchange works.
This beginners guide will give you an introduction to Betfair sports trading.
Once you have read this guide, you will have the ability to create your own trading strategies and have the knowledge to start your journey into this new world. It would be beneficial to have the Betfair platform open as you are reading this beginners guide. So go ahead and spend a few minutes opening an account if you don’t already have one. You aren’t even required to deposit at the account opening stage. The introduction of Betfair was a revolutionary concept. For the first time, ordinary punters were able to back and lay the selections they wanted. Meaning you have both options being the average punter and placing a bet. You can also take the role of the bookmaker offering a bet. The over-round that bookies have to include to ensure a profit there. Betfair prices are, in theory, the true market value.
Backing and laying on Betfair
Backing a selection on the betfair exchange is, therefore, the same as placing a bet on a traditional fixed odds bookmaker. You choose your stake and place the bet. On the Betfair exchange, you can enter your odds in the hope of getting a better price matched. Below is an illustration.
As you can see, the current odds on this football match to back Aston Villa are 2.62. When clicking on the 2.62 on the back side (blue), the box on the right-hand side pops up. I have put odds of 2.70 that I would like to use to back. If the price on Aston Villa started to drift a little, then my back bet could get matched. You will notice that all the prices shown on Betfair are in decimal. Unlike the traditional fractional format used in the UK. You can always convert back to fractions if you prefer? All you need to do is subtract one from the decimal odds price. If the sum in decimals is 3.00, then that equals 2/1 (3.00–1).
Now, as the price I have entered is higher than the current price, there is a chance that my wager won’t get matched. In this case, you can either cancel your wager or adjust the amount to a lower one to ensure the wager does get matched. A useful aspect of Betfair is showing you the financial outcome of any bets you are planning to make.
You can see from the above image, my £10 stake on an Aston Villa win means I make a profit of £17 if they win. After commission, which we will explain shortly, and a loss of £10 if they draw or lose. If you don’t think Aston Villa will win? You also are confident they won’t lose, this is where being able to lay a bet comes in. If you lay Brentford not to win you will make a profit if the match ends in a draw or an Aston Villa win.
Here I have clicked on the lay box (pink) at 2.98. Also, it shows us the monetary value of all outcomes when I enter my proposed stake. This option is where things differ from the traditional back bets. The most we can profit is our £10 stake (less commission) if Aston Villa wins or it’s a draw. However, we can lose more than our stake (if betting at odds of over 2.00) if Brentford wins the match. We have two results on our side in this scenario though.
Locking in a Profit
Being able to back and lay on the same event gives us the opportunity to be able to lock in a profit no matter what happens. A lot of the markets on Betfair go in-play. You can confirm this as long as there is the tick on the left-hand side of the image above with ‘in-play’ next to it. Consequently, if we had backed Aston Villa before the match started at 2.62, then they went on to take the lead. Their price is very likely to shorten quite a bit after taking the lead. Thus giving us the chance to lay (back against) Aston Villa. Ensuring we profited no matter what happened during the rest of the match.
The above image shows what would be possible if the price for Aston Villa to win the match dropped from 2.62 to 2.00. You can see that I have entered a potential lay bet. Backing against Aston Villa for the same stake as my original back bet. Means that I cannot lose any money in this market, no matter what happens. Hence if Villa wins the match, I make a profit of £6.20 (less commission), and if they draw or lose the game, I break even. It is possible to enter a stake in the lay box that would ensure an equal profit among all three selections. The image below shows what I mean.
I have entered a lay stake (£13.10). I now have an equal sum of profit on all three possible outcomes of this match.
The owners of Betfair make their profits through commissions on net winnings. You are only ever charged a commission on your net winnings, never on a losing bet. The starting rate of commission is 5% of net winnings. Thus, if you were to profit £10 from a bet, you would have £0.50 deducted from those winnings as commission. The rate of commission charged decreases the more you use the exchange. For a more detailed look at Betfair commissions, you can read our article here.
Now you are aware of the basics of backing and laying (carry on reading below for a more in-depth explanation of back and lay bets). Therefore you now know how to lock in a profit on a selection if the price moves in your desired direction. It is worth having a play around on your favourite markets to see the various outcomes that are possible. You can do this without risking any money at all. Betfair allows you to see the potential results of bets without going ahead with them.
Getting Started on Betfair
You are likely to have your favourite sports in mind that you will be attempting to profit from on Betfair. Now that you have completed our beginners guide you also need to put aside a betting bank so you can begin. You must have a separate betting bank from anything else you do. You will use it to create an income going forward, and you want to be able to leave it in place to enable it to grow.
So what is back and lay betting and how can it be used to make a profit?
Betting exchanges can seem daunting at first, even if you are experienced when it comes to using standard online bookmakers.
When placing bets at a betting exchange, you not only have the same option offered at a bookmaker, which is to back the outcome of an event to happen but also the opposite, to bet against an outcome happening. This is known as a ‘lay’ bet.
However, the first thing you need to understand when using a betting exchange is the odds and they will always be presented in decimals. These are easy to follow and if you are used to using fractional odds, it will not take look to get used to the decimal version found at betting exchanges.
As highlighted above, a back bet is when you put a wager on something to happen. This could be placing a bet on Burnley to defeat Tottenham at 5.7. If you put a £10 bet, you will stand to receive £47 if Burnley wins the game.
On the other hand, you can wager against Burnley winning the game. This is a lay bet and for the wager to succeed you need Tottenham to win the game or for the match to end in a draw.
This is a basic illustration but shows you how back and lay bets work and what they mean. Another lay bet would be to back against Liverpool winning the Premier League. If any other team wins the Premier League, your bet will be a winner.
However, there is one aspect to lay betting you need to be aware of and that’s a liability. You are essentially taking the role of a bookmaker when you lay a bet. So, if you put a bet on odds of 6.0 and it wins, you win £50. That’s straight forward.
However, this is reversed when laying a bet and to make £10 you would need to bet £50. You will see an amount of money under each set of odds at betfair exchange and this is the liquidity available for that bet. The more popular the market, the higher the liquidity and you must always check there is enough liquidity or your bet runs the risk of not being matched.
The great thing about lay betting is it can be used to make a profit or at least reduce the risk involved when placing a bet.
So, if you back a football match using £100 to end in a draw at 4.0 your potential profit is £300. At half-time, the game is 0–0 and the odds for a draw may have shortened to 3.10 for example. You can lay at this price and will need to have a liability of £272 to win £130.
If the game ends in a draw you will win £300 from your initial back bet but lose £272 from your lay bet. However, the result is a £28 profit. If the match ends with a win for either team, you will win £130 but lose the £100 you put on the draw, which results in a £30 profit.
Either way, you have used the back and lay bets to make a profit.
This is a simple case and you must remember you are still betting and there is always risk involved. You are relying on the movement of prices and you always need certain things (such as the 0–0 draw at half-time) to fall into position for you to make it happen.
Now you know how to put a bet and lay them we will move onto the next section:
How to Betfair Commission work?
What is Betfair Commission and do all Betfair clients have to pay?
Every market has a Market Base Rate (MBR). This Rate is the highest percentage you will pay in commission if you win.
Traditional bookmakers generate their earnings from the over-round on any given market. Betfair, on the other hand, have very little over round. They produce their profits through a charging commission on any net winnings.
Only winning bets get charged commissions, if you have a loser, you will receive no charge at all (quite right too!).
To work out the commission rate, you can use this calculation on any bet.
Commission = Net Winnings x Market Base Rate x (100% ‐ Discount Rate).
Don’t worry if the calculation makes little sense at this point; we will explain everything below.
How much commission will I pay?
The above is an illustration of the commission you would pay if you have a net profit of £400 on a bet.
The default market base for customers in the UK and Ireland is 5%.
Therefore it means that Betfair charges a 5% commission on any net profits.
You will receive points for every wager matched on the Betfair Exchange (win or lose). The more points you manage to accumulate, the less commission you will have to pay.
By accumulating these points, you will increase your Discount Rate. In turn, then lower the amount of commission you end up paying.
From the above image. The 40% Discount Rate has reduced the commission on the net profit of £400 from £20 (£400 x 5%) to £12 (£400 x 5% x (1–40%).
The table below shows the points needed to qualify for the various discount rates.
The different Betfair commission rates.
You will, thus, earn 1 point for every 10 pence of commission paid (from net winnings).
If you have had a net loss, you will still earn Betfair points on the implied Betfair commission.
Do I pay Betfair commission if I lose?
In this example, even though you had a losing bet, you would have earned 35 Betfair points. To work out the commission that is applied, it’s £3.50 divided by 10. This sum accumulates towards your discount rate to help when you next have net winnings.
Using Different Betting Exchanges.
Betfair has by far the most liquidity of all the exchanges. So it is also worth having an account with at least one other exchange. This way you make sure you get the best possible offer.
Currently, three other betting exchanges are available to UK customers:
Smarkets — 2% commission
Betdaq — 3% commission
Matchbook — 1.5% commission
There could be occasions when you are in a trade/bet, the Betfair platform goes down, meaning you would be unable to exit that trade/bet if you wanted to. Having funds in one of these alternative exchanges will mitigate this risk.
Added to that the lower quantities of commission you end of paying, these are well worth checking out.
Betfair commission is derived from a market base rate of 5%. Commission Here is an example £400 x 5% x (1- 40%) = £12 commission. 40% is an example of a customer who has earned a 40% discount rate.
Next topic is liquidity and what markets should you be using:
Managing Betfair Liquidity in 2020
Betting exchanges are a great place for sports betting. Not only do you have the opportunity to put bets at superior odds to most online bookmakers, but you also have a variety of betting options. It is possible to not only back a team or player to win but also a team or player to lose.
Betting against a team is known as lay betting and there are many strategies you can adopt when using a betting exchange, the best of which we have covered on the website.
However, before you begin using a betting exchange, one of the most important aspects to understand is betting exchange liquidity.
What is Betfair Liquidity?
Betfair Liquidity is the sum of money available for you to bet for the chosen event and odds. When placing a wager at a betting exchange, you are betting against another gambler. When two people are betting against each other, the betting exchange will match them.
There must be enough liquidity on the betting exchange for the odds on which you want to bet to be able to put the bet. In other words, there must be enough money available to match the wager you want to place. This could be a back bet or a lay bet.
To find the liquidity for the odds on which you would like to bet, you just need to look directly under the odds. Here you will find a number and this is the total liquidity available. The liquidity will be displayed as a sum of money and in the currency of your account.
Betfair Liquidity Example
Let’s take a look at an example of betfair exchange liquidity to understand how it works. Liverpool is playing Manchester City in the Premier League; it is a massive game. Therefore, you can expect to find plenty of liquidity on most of the odds for this game.
To put a lay bet on Manchester City, there is the figure £27,898 under the odds. This means you can wager anything up to that quantity and the bet will be accepted because it matches the sum that is shown. You can wager anything you like up to and including that amount.
What you will be unable to do is bet anything over that sum as it will not be matched and the betfair exchange may reject the bet. It is a large number so it is very unlikely you are going to be getting close to that sum but it is a good example and shows how betting exchange liquidity works.
Not every football match or sporting event is going to have as much liquidity as when Liverpool play Manchester City. You may want to place a bet on a lower league football match or a tennis match featuring two lower-ranked players.
In this instance, you may find the betfair exchange liquidity to below. What happens when this is the case?
If the odds on which you want to put a bet have liquidity of £20 and you want to put a bet of £40, which is double the liquidity amount, you can still place the bet. You can then wait and see if the amount you bet will be matched on the befair exchange.
So, if you put the bet of £40 you will need to wait to see if another gambler enters the market at the odds on which you have a bet. If the odds are bigger or shorter, it is unlikely your bet is going to be matched.
The betfair exchange will let you know if your bet has been successfully matched. If it is not matched, you can cancel the remaining stake that has not been matched but generally, this is considered to be a bad idea unless there has been a major change in the odds.
What’s the best way to avoid not having your bet matched at a betfair exchange? Only wager on the major events where the liquidity is high and there is a lot of gambling action.
The liquidity of betting exchanges is always changing. There are always people entering and leaving the market. In the case of the most popular betting markets, the number of people entering will increase over time and this will see the liquidity rise.
As the number of people betting increases, so does the liquidity. Therefore, as time gets closer to the beginning of a major event, such as Liverpool vs Manchester City in the Premier League, the liquidity should increase significantly. This makes it easier to have a bet matched.
Ensuring Your Bet is Matched
Your wager must be lower or the same amount is shown below the odds of the market on which you would like to bet. If it is not, there is a chance it will only be partially matched. To avoid this from happening, only bet on odds which already have enough liquidity for the amount you would like to bet.
The other option is to wager on an event you know is going to be popular and the liquidity is sure to rise as the start of the event approaches.
In most cases, the only time you will need to consider the market liquidity of odds is if you are betting on a small event or at a less popular betting exchange. For most major sporting events there should be no problem but it always pays to be aware of market liquidity before placing a bet.
The Differences Between Betting Exchanges and Traditional Betting Companies
The modern-day gambling industry produces a yearly profit of around £14 billion for bookmakers in the United Kingdom. This number continues to rise by over £1 billion each year.
Globally, that amount is expected to be up to £625 billion. The industry has provided work to around 100,000 and 125,000 people between the betting area such as arcades, casinos and bingo.
Traditional bookmakers have been in existence for many years, and you can trace them back to the 1790s and Harry Ogden. He is regarded as being the first bookmaker in the United Kingdom, and while new betting markets and the way people can wager has changed, the basic principles have remained the same.
It wasn’t until the turn of the millennium when we saw the first major betting exchanges. Betfair was the first of the big betting exchanges to emerge, but today there are several available including Smarkets and Matchbook.
With betting exchanges and traditional betting companies running alongside each other online, what are the main differences you should be aware of before placing a bet?
At a traditional betting website, you can place what is known as a back bet. You bet against the bookmaker, and if you are successful, the bookmaker pays out your winnings. That is the only option you have at a bookmaker.
However, when placing a bet using a betting exchange, users can both back and lay bets. What this means is users at an exchange can bet for an event to happen (like at a standard bookmaker) and back against an event to occur (lay bet).
When placing a lay bet at an exchange, you are effectively becoming the bookmaker. For example, if you put a lay bet on Manchester City, you are betting against them and need the opposition to win or for the match to end in a draw.
A traditional betting company makes money by accepting bets and taking the money from losing bets. A betting exchange makes money by charging a small commission on each bet placed, usually between 2% and 5%. At many of the major exchanges this is only paid on winning bets, but at smaller exchanges, it could be on all bets, so always check beforehand.
The second main difference between bookmakers and exchanges is the odds. Without the middle man (bookmaker) taking a cut on the bet, the odds are usually superior on a betting exchange. For example, ahead of the Manchester City vs Chelsea game in February 2019. You could also back Chelsea to win at 11/2 at a standard bookmaker, but the same outcome was on offer at 13/2 at a betting exchange.
Even when placing a £10 bet, there is a significant difference here and over time that will soon add up.
When using an exchange, you can set your odds, and if someone is willing to accept them, the bet will be matched. It gives you greater flexibility when betting and you do not have to merely take the odds handed to you by the traditional bookmaker.
While traditional betting companies will often set a restriction on the quantity of money, you can stake, betting exchanges will not. The liquidity determines the sum you can bet, and the betting exchange is merely acting as an intermediary for users to place bets. An exchange is not concerned with the outcome of the event.
You will not find the same level of promotions available at an exchange as you would a traditional betting company because the business model does not support them very well. However, there are many plus sides to using a betting exchange, as highlighted above.