A betting exchange is essential to matched betting. Betting exchanges such as Betfair and Smarkets allow you to place a bet on a result not happening, they effectively allow you to act like a bookmaker. All of the odds listed on betting exchanges are generated by users and you are betting against other bettors and not against the exchange. The betting exchanges don't care who wins or loses the bet as they make their money by taking a commission from the winnings of the person whose bet has won. Betfair and Betdaq charge 5% and Smarkets charge 2%. Smarkets will be used throughout this matched betting tutorial as they are more profitable to use than other exchanges for this type of betting due to their superior commission.
So let's get to it.
At a bookmaker you place a bet on an event to happen and if it doesn't you lose your stake.
For example Bournemouth are playing Newcastle and you think Newcastle will win. If you placed £10 on Newcastle to win and they draw or lose, then you lose your £10 stake.
On Smarkets however you could “lay” Bournemouth and if it's a draw or a Newcastle win, then you've won your bet.
You have acted like a bookmaker by accepting a bet off another bettor who thinks Bournemouth will win.
As you can see from the screenshot below, we would have laid Bournemouth for £10 at odds of 2.28 and if Bournemouth win we lose £12.80 and if it's a draw or a Newcastle victory we mate a profit of £10 (minus 2% commission = £9.80 profit)
So knowing that we have the ability to back an event like a regular punter and also lay the same event like a bookmaker opens up some exciting opportunities for us to make some risk free profits from matched betting.
There are just two things you need to do now…
If you've missed the first article, then you can start at the Matched Betting Guide