Betting Exchanges – Good and Bad

When you compare exchange prices to bookmaker odds there is no doubt that you get a better deal overall. The benefit for the exchange is the commission they receive and that can be as low as 2%, which, if you are searching for a bit of value or even want to lose your money at a slower rate, is competitive.

So, exchanges trump bookmakers, and we should all be using exchanges all the time? Not necessarily. Sometimes bookies offer odds on events not available on there and just occasionally offer better prices without the need for any commission.

Shop around is the mantra. Imagine a shrewd punter gets shut down by the bookies ‘cos he’s winning too much. Betting exchanges are the perfect outlet as he can pit his wits against others and that is where you need to run caution with the exchanges.

Betting on anything new will be a learning experience and so it was when I started using Betfair. I would look at prices on there and offer a few of my own but soon learned that it is not quite as straight forward as it first appears.

For some football prices there would be a competitive market on show. I remember wanting to back Nottingham Forest and here is an example of how it went. Imagine they were priced at 2.00. My thinking went like this. The market’s quite strong – I will put in an order to back them at 2.02 to get a fractionally better price. Kick off was still a few hours away and that was my downfall.

Prices are up there but there is not a great deal of trading going on. I did a few of these before it finally dawned on me. I did not have enough information to do what I was doing.

Either my bet would get filled at a bad price or it would not get filled at all.

A piece of team information would become available to somebody, certainly not me. If it was good news for Forest, then the price would shorten, and my order would be left hanging and never be filled. If it were bad news to the team then the price would fly the other way and my 2.02 would be filled immediately as the price headed off somewhere in the 2.20 direction.

Take last night’s Man Utd v Leicester game. Rounding a bit but, initially the price for Man Utd was near 2.5. At some point the team news began to leak out and by kick off they traded at around 4.0.

I do not have an inside track at Man Utd but imagine if I did and had an account with Betfair. There’s money out there to be traded so I am going to lay United for £1000 at 2.5 prior to the news leaking out, hold tight for a while, as this team news is severe, and punters will take time to absorb it. Hold off for as long as possible, then return to the market and back them for £1000 at 4.0. If United win the game I make £1500 and anything else I get my money back. Or I could cash out and lock in a nice decent profit prior to kick off, without even caring what the result of the match turns out to be.

Serious winning accounts at Betfair pay a premium charge. If you have never heard of it and have an account, look it up. This demonstrates that it is possible to make serious money on the exchange but also highlights what punters in general are up against.

To make money betting you must have an edge of some description. That edge for a bookie is the odds being priced in their favour on a regular basis. On an exchange there are more possibilities. The edge could be having the team news before everybody else as in the example above. Keep doing that and you will never lose. Another example is courtsiding on tennis where the information is delayed by enough to allow people to ‘anticipate’ the next point or game result. Bots can be attached to hoover up market inefficiencies.

Many years ago, I would have done my righteous indignation bit but times change. The next example, also from many years ago, shows how much times change.

A punter spotted that the kick-off time of a football match had been placed incorrectly on a football coupon. Knowing the result, he bet on it in the bookies. When he returned to collect his winnings, the police arrived to escort him off the premises.

It is a fine line sometimes to distinguish between gaining an edge and insider trading. That line gets even finer when the exchange takes some of the profits from this activity.

Okay, I still suffer from righteous indignation, but the point is this.

These types of thing occur on a regular basis on Betfair. Most punters will be unaware of any of it, and it is important to arm yourself with as much pertinent information as possible.

Consider your profit and loss figures. If the percentage book for markets you bet on is around 100% then, long term, your losses will be close to what you are paying on commission with a bit extra added in to allow for the fact that markets generally will be trading slightly higher than 100%.

If betting in play, how up to date is your feed? Do you tend to lose more money trading in play than at other times? Are there people out there who get the information before you?

This is not an attempt to denigrate betting exchanges or activity on them. More it is to acknowledge their strengths in what they offer the punter but at the same time to be aware that even an exchange is not a level playing field, so spot the areas where you can get picked off and plug those gaps.