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In betting exchange trading terms, hedging is a strategy that involves placing an additional bet (or bets) on a different outcome(s) to your original bet to ensure that you secure a guaranteed profit regardless of the result or, at the very least, reduce your risk on a market whereby the odds have perhaps moved against you.
So hedging can be used to either guarantee a profit, or as a strategy to minimise your risk and reduce your overall exposure.
It’s possible to calculate hedge bets manually yourself, but it does require a reasonable amount of time and effort and is of course prone to human error.
For example, if you’re hedging your bet using a betting site and a betting exchange or two different betting exchanges, it’s easy to forget to include the betting exchange commission when converting the original lay odds.
That can prove to be hugely costly when trading on the betting exchanges, so it makes far more sense to rely on a hedging calculator.
What is the Hedging Formula?
Below is the formula for ensuring that you win the maximum amount on any bet you hedge:
x = (p+b)/r
x = the amount you should bet on hedge p = the profit you stand to make on the first bet b = the first bet you made r = the decimal odds of the second bet
Why use a Hedging Calculator?
As you can see, that’s a fairly time-consuming job to do manually and one that can comes with some obvious potential pitfalls. A hedging calculator takes out all the hard work and risk, whilst it also saves you time that can be used more productively elsewhere.
Betfair trading is often very time sensitive, so a hedging calculator is the sensible option for traders to see how much they need to either back or lay to hedge a betting market.
Whether you’re backing or laying first when hedging your bets, a hedging calculator tells you how much to back or lay when trading out in order to leave equal profit or loss across all your selections. It’s the perfect tool, whether you need to lock in a profit or you are looking to protect your betting bank by cutting your losses.
Hedge Betting Example
One market that is particularly popular among traders looking to hedge their bets is laying the draw in football.
If, for example, you have laid the draw in a match between Liverpool and Manchester United at 3.50 for £100 and Liverpool take the lead, the draw may drift out to 6.00. At this point you may want to look at hedging your bet to secure a profit whatever the eventual result – Liverpool win, Manchester United win or draw.
To do this, you would enter all the relevant figures into the hedging calculator – lay odds (3.50), lay stake (£100) and backing odds (6.00), plus the betting exchange commission (we’ll use 5% here as an example).
The hedging calculator will then show you how much you need to stake when backing the draw to ensure a guaranteed profit whatever the final result. In this instance you would need to stake £58.33 to guarantee a profit of £39.59 regardless of result.
A hedging calculator also gives you the best possible option to lock-in a profit or cut your losses when backing with your initial bet, so it’s a fantastic tool for anyone who’s looking to trade on the betting exchanges.