Betting Exchanges Frequently Asked Questions

What is a Back Bet?: The betting exchanges refer to a win bet as a ‘Back Bet.' This is because it can also be used in their place markets ie: to back a horse to place. A Back Bet is otherwise like a win bet.

Examples of Back Bets are: betting on Sea The Stars to win The Derby or on Alex Reid to win Celebrity Big Brother or Manchester United to win the Premiership Title. It is just like betting on a selection to win with a traditional bookmaker.

The other reason Betfair betting exchange refer to it as a Back Bet is because with a betting exchange you can also bet on an event not to happen (known as a Lay Bet, explained in the next FAQ).

Just to clarify a Back Bet, here is a screenshot of a Back Bet that has been placed on a horserace on Betfair:

Back Bet Explained

In the example above, we have placed a £10 Back Bet on Go Native to win The Champion Hurdle at decimal odds of 6.8 (that's 5.8/1 in fractional odds). We have placed a Back Bet. It is a win bet.

You can see under the horse name what we will win or lose if that particular horse wins the race. If Go Native wins we win £58 (see the £58.00 in green). If any other selection wins then we lose £10 (see the red -£10.00 under the other selections).

To visit Betfair Betting Exchange - click here

Go Back to Top

What is Laying or a Lay Bet?: Placing a Lay Bet means that you are wanting the chosen selection to lose. You are laying Manchester United to lose against Liverpool. Obviously Manchester United will lose if the result is either a draw or a win for Liverpool. In that case your Lay Bet has won.

The best way to understand a Lay Bet is to imagine that you are the bookmaker and someone comes up to you and places a bet on Manchester United. You pay him out if Manchester United wins, so you want Manchester United to lose because otherwise it will cost you money. You have 'layed' Manchester United.

Now on Betfair you can be a bookie anytime you like and you don't even need a bookies licence (amazing but true!).

I am going to show you an example of a Lay Bet. There is a Fulham v Burnley Premiership football match tonight. You take a look at the betting odds and you say to yourself: "I can't see that match being a draw. I want to lay the draw. I want to be a bookie and take money on the draw."

Look at this screenshot and before you read the text below it try and work out exactly what we have done in this screenshot. What Lay Bet has been placed?:

Lay Bet Explained

Does it make sense to you? If it does you have grasped the Lay Bet concept already.

As you can see we have layed the draw. We have taken a £10 bet at 3.6 (2.6/1 in fractional odds) on the draw.

Do you see the figure in pink shading alongside the draw '3.6', with a sum of money £391 beneath it. We clicked that figure and layed it for £10. That £391 is the money waiting to back The Draw at 3.6. We layed £10 of it. before we took that £10 bet that figure did not read £391 is read £401.

What does it mean to us financially? Well if you look under Fulham and Burnley then you see that we make £10 if Fulham wins or Burnley wins (£10 in green under those selections) but we lose £26 if the match is a draw (-£26 under draw in red).

If this has confused you then you must read this section again. You will grasp the concept of laying.

Changing subject slightly, and still looking at the screenshot above, you can see that we could back Burnley at 5.7 (4.7/1 in fractional odds) and lay Burnley at 5.8 (4.8/1) odds. We could back Fulham at 1.83 (which is almost 4/5 in fractional odds) or we could lay Fulham at 1.85.

People lay bets because they might have strong opinions about a selection. They might lay Fulham because they think they are poor value at 1.85. They might lay the favourite for the novice chase horserace because they think his jumping will be his downfall.

Some people find it easier to find a selection to lose that to find a selection to win.

The best way to get to grips with it is to have a go for small stakes, just to get the hang of things. And Betfair will give new clients £25 of free bets to do just that: To visit Betfair Betting Exchange - click here

Go Back to Top

People say they Trade on Betfair. What is that all about?: What they mean is that they try to hedge their bets to guarantee a profit. They will have more than one bet on an event to achieve this.

As with everything on betting exchanges this is best demonstrated by example. They may back Manchester United at 3.0 (that is 2/1 in fractional odds) to win the Premiership Title. Then when the odds on Manchester United winning the Premiership Title reduce to evens (2.0 in decimal) they may lay them. Imagine this:

1. Back Manchester United at 3.0 for £100 = £200 profit if they win and £100 loss if they lose.

2. Lay Manchester United at 2.0 (evens) for £110 = £110 profit if they lose and £110 loss if they win.

Put those two bets together and If Manchester Utd win you win £90 (£200 winnings from the Back Bet - £110 losses from the Lay Bet). If Manchester Utd lose you win £10 (£100 loss from Back Bet and £110 profit from the Lay Bet).

You have won in both scenarios. That is called Trading.

Also, the great thing is that on the betting market itself when you back and then lay, Betfair's market will show you your position. It will show green £10 against all other selections and green £90 against Man Utd, so you don't need a calculator to work it all out!

Some traders may have tens of bets on a market like that, backing and laying selections to ensure the end result is a profit.

Here are a couple of very interesting screenshots. The first one shows a "green book". In this instance you can not lose:

It is important to explain exactly what is going on in the screenshot from a Betfair account above. I have included on the right of the screenshot the 'backs' and 'lay' that occurred in this race. The first thing this betting exchange player did was to lay the favourite (Canni Thinkaar) at 1.8. The lay was to take a £120 bet (lay) Canni Thinkaar at 1.8 (that's 4/5 in fractional betting odds). That bet alone would lose the operator of this account £96 if that horse won. ie: he has been the bookmaker and taken a bet of £120 at 1.8, so would pay out (or lose) 0.8 x £120 = £96 if it won.

However this betting exchange account user then saw the horse he had layed at 1.8 drift out in price during the race as the horse started to struggle. Just to make sure of a profit he had £10 win at 110 (109/1) on Canni Thinkaar. At that point he could relax as Canni Thinkaar would now make him £979 (as shown in screenshot) and every other horse would make him at least £95 (see the green against each of those other horses).

This Betfair client had one other play in this race. Before I tell you what it was take another look at the screenshot and work out what his third play was in this race. Know the answer? Yes, he had a £15 bet on Jades Double at 110 (109/1). That was nothing to do with the other two bets. He just thought that horse was value at the start of the race at that price - but he was wrong. By the time this screenshot was taken Jades Double was already pulled up and out of the race, hence his odds showing as "1000" (999/1) which is the most any selection can ever show up on on a betting exchange. Odds of 1000 suggest the horse is already out of the race or beaten or useless!

Incidentally Herald Angel, trading very short in the betting when this screenshot was taken, did win the race. Our betting exchange trader therefore made £95 on this race.

Now for that second screenshot we promised which, at the time it was taken, showed a guaranteed profit for this clever (or should that be lucky?) Betfair trader:

Let's explain what our intrepid Betfair trader got up to in the screenshot above. To follow our man's logic we need to know precisely what order he placed his 'backs' and 'lays'. This is what he did:

Before the race started he layed the two favourites in this race. You can see the lays he placed. He took £100 at 3.7 on Planet of Sound to lose £270. He also took £100 on Herecomesthetruth at 3.3 to lose £230.

So in fact at that point his worst liabilities were if Planet of Sound won he would lose £170 (270-the £100 he would then win from Herecomesthetruth losing). If Herecomesthetruth won then he would lose £130 (£230 loss and £100 profit from Planet of Sound losing).

He got fortunate as one of the horses he layed fell at a fence. That is not good for horse or jockey but it did rule Planet Of Sound out of the race (hence Planet Of Sound trading at the maximum 1000 odds in the screenshot). Our Betfair player then only had Herecomesthetruth to worry about. That was the only horse that could cost him. So when Herecomesthetruth started to drift in the betting as he began to drop back in the race our trader hedged the situation and guaranteed a profit by having a £25 bet on Herecomesthetruth at 7.0 (6/1). You may think this hedge was foolish as the horse looked an unlikely winner but I disagree. It guaranteed a profit whatever the outcome and if you look at the screenshot you can see Herecomesthetruth did shorten up again when he looked more of a danger as he is trading at 5 (4/1) in the screenshot. Had Herecomesthetruth won this event then the betting exchange player would have kicked himself for losing on the race when he could have guaranteed a profit. The action of hedging and locking in a profit if you are handed that chance is the only way to ensure long-term profits. This is where it stops being gambling and becomes trading.

You can see if Herecomesthetruth had won the race then he would have made £20 (small beer but better than a £130 loss). As it was, Monets Garden won and our betting exchange trader won £175.

It is never foolish to lock in a profit. It is foolish to ignore the opportunity to lock in a profit and then end up losing as a result. Remember, trading on a betting exchange is about behaving with commonsense all the time. Sometimes, in the short-term, you would have made more gambling but in the long-term this sensible behaviour is the only way to sustainable profits.

To visit Betfair Betting Exchange - click here

Go Back to Top

How is the Betfair commission calculated? How does a betting exchange make its money?: This is how Betfair make their money: they charge a commission rate of 5% on your net profit on an event. You may have had numerous bets and numerous lays on the one event. Your turnover on that event may be £2000 but if you only ended up making £10 on that event (once all your bets are settled on it) then you just pay 5% of that £10 (ie: 50p commission). If you lose on an event then you pay no commission. The 5% commission rate that Betfair charges can be reduced but this only happens as your turnover on the Betfair betting exchange increases. The more you use Betfair the more your commission decreases from that 5% level.

Go Back to Top

What is the minimum stake on Betfair?: Whether you are placing a Back Bet or a Lay Bet the minimum stake is £2 or currency equivalent.

Go Back to Top

Can I cancel a bet on a betting exchange?: Not if it has already been matched and placed. If your bet has not been matched but is waiting to be matched then you can cancel it. You can even alter it. You can alter the odds you want it to be matched at or you can alter the amount of money you are looking to match.

To visit Betfair Betting Exchange - click here

Go Back to Top