Typically betting used to involve the customer “backing” a bet with a bookmaker who would “lay” the bet. This means the bookmaker will then pay out if the customers wins or keep your stake if the bet loses.
Betting exchanges change all of this by allowing you to play the role of the bookmaker giving the customer the opportunity to back or lay a bet.
When you back or lay a bet at a betting exchange you are not placing a bet with a bookmaker. You are instead placing a bet against another person who is backing the opposite outcome.
Backing and Laying
Backing a bet at a betting exchange is just like placing a bet with a bookmaker. You place your bet and if you win you get your stake back plus your winnings and if your bet loses you lose your stake.
However when you lay a bet at a betting exchange you take on the role of the bookmaker. You choose the size of the bet you want to lay and if the backed bet loses you get to keep the other betters stake.
If the backed bet wins you have to pay out the winnings to other better which could be substantially larger than their stake depending on the odds.
For example if you lay an outcome at odds of 5.0 for £10 your liability would be £40.
This means if you lost you would lose £40 and if you won you would win £10.
You can also lay a bet by backing the opposite selection at another bookmaker. For example if you bet on over 2.5 goals at bookmaker A you could lay the bet by backing Under 2.5 goals at bookmaker B.
How do Betting Exchanges Make Money?
So you might be wondering if the bets at betting exchanges are being placed against other customers, how does the betting exchange make any money?
Betting exchanges make their money by taking a small commission on winning bets. These commissions vary from as much as 5% to around about 2% depending on what exchange you use a how much you bet there.
For example at a 5% commission rate if you won £10 the betting exchange would take 50p leaving you with £9.50.
With millions of pounds worth of bets being placed every hour, betting exchanges are very profitable money making machines for the people that run them.
But it’s not just the owners of these betting exchanges who are making all the money. Some smart customers are also using betting exchanges to make guaranteed profits with arbitrage betting.
What is Arbitrage Betting?
Arbitrage betting is when you back a bet at a bookmaker or betting exchange and then lay the same bet at lower odds at a bookmaker or betting exchange locking in guaranteed profit whatever the outcome.
Differences in odds occur when bookmakers have different opinions on an outcome of an event or sometimes when the bookmaker has made an error.
You can look for differences in odds on odds comparison websites and when the difference in odds is large enough you need to move fast and place your bets.
For example a bookmaker has odds of 2.0 for Team 1 to win and at a betting exchange you can currently lay Team 1 at odds of 1.85 with a 5% commission.
This means you could back Team 1 at the bookmaker for £100 at 2.0.
You could then lay Team 1 at the betting exchange for £111.11 at 1.85 at a 5% commission.
This would lock in a guaranteed profit of £5.55 no matter what the result was.
This may not sound like much but you could easily place 10 different bets like that in a few hours and have made over £50 with very little effort.
Make Money Arbitrage Betting with Software
In the fast moving world of online gambling odds are constantly changing so you have to act quickly to ensure your bets are placed before the odds change.
With odds changing so quickly you will struggle to find these sure bets, calculate how much you need to stake at each bookmaker and place the bets in time before the odds change.
One of the best tools I have found to overcome this problem is Oddstorm.
This software looks at the odds on various events on betting sites and picks out profitable opportunities as soon as they appear.
You then enter how much you want to bet into its calculator and it tells you how much money you need to place on your opposite bet in order to lock in a profit regardless of the result.
In my opinion if you are attempting arbitrage betting without automatic software and searching for all the bets yourself you are wasting your time.
There is free arbitrage betting software available too. I have tried many of these in the past but they often work with a delay built into them.
This means by the time you see the sure bets, other people using paid software have already bet on these markets so the odds will have often changed and the opportunity will have been missed.
Arbitrage Betting Risks
Arbitrage betting does not come without its risks. There is typically four things which could go wrong when attempting to place an arbitrage bet.
Every now and then when you are in middle of placing an arbitrage bet the odds on the selections will change.
This will usually mean whatever profit there was to be locked in is now gone and if you were to place the bets you would be locking in a guaranteed loss.
The chances of this happening can be minimized by using paid arbitrage betting software and acting only on opportunities which are less than a minute old.
Even when using this strategy this problem will still occasionally occur. If you have not placed either of your bets yet then this is fine. Just forget about it and move on to a different bet.
If you have however already placed one of your bets the best thing to usually do will be to bite the bullet and place the second bet.
This will lock in a small loss that you can and will earn back through other arbitrage bets.
If you read the small print in almost all bookmakers terms and conditions you will find that they reserve the right to void any bets if they deem themselves to have made an error with their odds.
There is not much you can do about this if you have already layed the bet at the betting exchange or another bookmaker apart from hoping your bet with on the betting exchange/other bookmaker wins.
Thankfully this rarely occurs and has only happened to me once within 3 years of arbitrage betting.
Your Own Mistakes
The fourth and final thing that can go wrong when you are placing an arbitrage bet is that you make a mistake.
This is easy to do when you are caught up in the heat of the moment and trying to place your bets fast before the odds change.
Betting the wrong amount, placing bets on the wrong outcome or even the wrong event. You name it, I’ve done it.
When you are new to arbitrage betting you will make mistakes.
The trick is to start off betting small when you first start arbitrage betting so these mistakes won’t cost you too much and make sure you learn from your errors.
Starting off betting small will allow you build your confidence when placing your bets and will ultimately make you more level headed when you get onto placing bigger bets.
One final piece of advice. Never chase your loses.
People who chase their losses almost always end up losing more money than they had in the first place.
If you lose a little money here and there due to your own mistakes or a cancelled bet don’t worry about it. You will soon make them back with your other arbitrage betting profits.
Next: What is Sharbing?