To the novice punter, a betting exchange can look overwhelming but to the value-conscious punter, they are manna from heaven. Why?

Better prices - because the bookmaker/tote is taken out of the equation, you are not subject to their 5, 10, 20 or even 50% margins. No overheads to support, no employees to pay, you are betting directly against other punters and their opinions. As a result, you end up with prices that average 20% better than bookies. This is especially true on markets with more selections - racing, football premierships, golf tournaments etc, where bookies traditionally make their 'bread and butter'.

Winners don't get banned or cut back - many online bookies will limit your stakes or close your account if you dare to beat them. It doesn't matter to an exchange, they only bring punters together, not take the risk themselves!

Betting in-play - with so many sports shown live on TV these days, why not bet in the run? Unsure about the team line-ups, what the tactics will be, or the state of the pitch? Then try watching the game for a while before placing a bet.

The ability to trade - Ever backed a golfer at big odds and be in contention coming into the final round, but you'd prefer to bet some of it back and walk away with a guaranteed profit? Now you can lay selections as well, so you could choose to recover your stake to leave you with a 'bet to nothing', or hedge your position to give you a profit no matter what the outcome.

The ability to oppose a selection - Ever thought Michael Schumacher was way too short with a Grand Prix, but couldn't decide who was going to win the race? Problem solved - by laying Schumacher, you would effectively be backing the field to beat him. So much easier to cheer the whole field!

In this series of columns, we will look at all of these options in depth. This week though, we will start with the basics to trading with an exchange.

As the clear No.1 in the exchange market, we will use Betfair for our examples, however the basics should work on all the sites.

Once you've signed up with an exchange, the first thing you should do is set aside some money to 'test' the system. It is very easy as a new player to make the mistake of backing instead of laying and vice-versa.

Find a market with little or no liquidity so you can have your own fun. It might be a horse race at obscure venue, or a Swedish bandy match or similar. Post some offers to back and lay selections. Note how an unmatched 'back' offer appears on the 'lay' side of the market screen (for someone else to match your bet), and how the reverse applies when place a 'lay' offer. Now vary the price and see how it changes on the screen. This is very important for when you are betting in-play or just before a race starts, when prices are quite volatile. Note that there are 'safety' screens before placing a bet, so you can be sure of what you are doing. Once you are confident you know what you are doing, you can bypass those screens by unticking the 'verify bets' box on the MyBets tab.

Next week, we will work on chasing better odds and how to trade a low volume market.

Let's end with a 'lay' tip - Manchester City are in all sorts of bother in the Premier League. One goal in five matches does not send fear through the spines of their opponents and Leeds are starting to resurrect their season. Lay Man City at any price below 2.20.