What are betting exchanges? An exchange is a market where people bet against each other. Think of it like being with a mate in the pub. You're both watching Chelsea v Manchester United. You think Chelsea will win. Your mate thinks they've no chance. You are both so convinced; you agree a price and give your money to an impartial observer. He holds the money during the match, and gives the winnings to the winner. A betting exchange works in a similar way to the impartial observer.

Now, imagine you are at home. You think Chelsea will win. Another person somewhere else, for example, South Africa, thinks Chelsea won't win. You've never met each other and you never will. At betting exchanges they anonymously match people from all over the world who have different views on things, and take a small commission from the winner.

There are a number of exchanges on the internet now, but by far and away the biggest and most liquid is betfair. The next biggest is betdaq followed by WBX.

What is backing and laying? A betting exchange means you can 'back' a selection to happen like you'd do at a traditional bookie. Or you can take the opposing viewpoint and 'lay' for your choice not to happen. Lay betting is basically like when you say to a mate 'Bet you can't score a penalty against me'. So, with lay betting you're offering odds to other betting exchange customers and saying what they think will happen, won't. It's the other half of the deal from a back bet. At betting exchanges for every back bet matched from one customer there is a lay bet matched for another.

In-play betting. Betting in-play is exactly what it says: betting while an event is going on. On betting exchanges you can place bets right up to the final whistle or until the winning horse passes the post or even after that if it's a photo finish. It's incredibly exciting. Think rain during play is going to affect the outcome of a cricket match? Or a player looks like he's going to be sent off? Get your in-play bet on and watch the odds change as events unfold.

Placing a bet. If you're selling your house and someone offers you a price that is way below the valuation, what do you do? You certainly don't accept the price. In the nicest possible way you tell them you'll need more or they'll have to find somewhere else to live. The exact same thing happens at a betting exchange. If you don't like the odds on offer you can ask for better ones, when someone accepts, the bet is matched.

All bets placed on the betting exchange sites must be matched with an opposing view to be valid. This means basically matching up people with different opinions on how an event will unfold. Go back to the house example. The owner suggests a price. The buyer points out there is dry rot in the attic. So, he offers a lower price. The owner knows that it's a fair price, so both agree and a deal is done.

Here's a betting exchange example. There are three options: Middlesbrough could win. Liverpool could win. Or there could be a draw. The blue boxes on the left show the best prices for backing each outcome. The pink boxes on the right show the opposing view for each outcome. This is called 'laying a bet'.

If you think Middlesbrough will win, click the blue box. This shows the best price for this happening. In each box, the odds are at the top, with the figure below showing the money available at that price. Here, the odds are 3.95 and the money available is £18.

So, if you want to bet on anything up to £18, you can take this instantly. If you want to bet more, say £50, £18 would be put on at 3.95 and the remaining £32 would remain on the exchange until someone takes up your offer and accepts the £32 at this price. If this happens, great! The bet is fully matched.

How to ask for a price. Returning t house the buying example, you're selling the place and are looking for the asking price. There's always bound to be a few chancers who come your way trying to talk it down: but you know that it's in better condition than they say it is. You stick to your guns and hold out for the asking price.

Eventually, they realise that this piece of real estate is worth buying at the asking price. You both strike a deal. The exact same thing happens on Betfair. If you don't like the odds on offer, just choose your own odds. Then leave the bet on the exchange and see if anyone bites. This is a great way of getting better value on the bets you make - as you only place bets at odds that you think are fair.

Using the Middlesbrough example above, here's how to change your odds. Click the blue box to back Middlesbrough. Then change your odds on the betting slip. Here we've used 4.5. Then confirm your bet. This is then submitted to the exchange.

All you have to do is check it's been matched. Do this by checking if it says 'matched' on your betting slip. If it hasn't, you may want to think about adjusting your price. Perhaps what you were asking for is a little unreasonable, Roger Federer to win Wimbeldon at 100 for example. If your bet stays unmatched, you can cancel it yourself and try a different price or simply leave it to see if it gets matched. If it does not, you get your money back.

Checking your bets. Betting exchanges are constantly changing and dynamic markets, so sometimes the money available at the price you want will be taken by the time you have placed your bet. This means someone has taken the bet before you. It's therefore really important that you check all your bets are matched when you place them (even if you're not asking for different odds). Do this by clicking the 'my bets' tab at the top of any event. This will tell you if all or some of your bet has been matched.

What is Lay betting? "I bet you won't score", "I bet you can't ace me", "I bet England don't beat Scotland." We all make statements to friends like this every day. What you're actually doing is 'laying a bet': betting something won't happen. 

You may not know which horse will win but maybe you're certain that horse who hasn't run for 150 days won't win. This is as good a time as any to place a lay bet. Like anything too good to be true, there is a catch. Should that horse win, you'll pay the backer his winnings, which could be a lot more than the stake. Just be careful what you decide to lay!

A couple of examples. You lay a horse for £10 at odds of 7. Your liability of £60 is taken out of your account. If the horse loses, you win the backer's £10 stake and your £60 liability is returned to you. But, and it's a big 'but', if that horse goes on to win the race, you lose your £60. The guy on the other side will get £70 back - your £60 plus his original £10 stake.

Another example: You lay Newcastle at 2.5 for £10. You lose £15 if Newcastle win, and win £10 if they lose or draw.

You don't have to lay only outsiders though - if you lay a selection at 'odds-on' (less than 2.0), it means you are risking less than your potential reward. E.g. lay 'Manchester United to beat Stoke' at 1.65 for £10. You lose £6.50 if Manchester United win, or win £10 if they lose or draw.

What to look out for: Back betting is exciting and lay betting is too.  But it's always a very, very good idea to check what you could be liable for paying out should the no-hoper you have chosen to lay win.

Also, be very watchful of where you put the decimal point. If you want to lay a bet at 3.2 make sure it is just that, and not 32... otherwise it will be an expensive mistake should your selection win. One thing's certain though, betting exchanges will only let you risk as much as is in your account.

Another advantage of laying with a betting exchange is that if you lay two selections on a single winner market, such as two horses in a race, or two tennis players in a tournament, your liabilities don't add up, your bets offset each other because there is only one winner.