A common misconception of betting in the odds market is that it’s all down to the results of individual matches. In order to be a successful player in the odds market, you must find bets with positive values and beat the odds over a long period of time, not just individual bets.
This text will explain the importance of beating the odds in the long run as well as some important concepts related to the subject.
- Opening odds & closing odds
- Odds movements
- Wisdom of the crowd
- Expected value
Opening odds & final odds
When a bookmaker releases odds onto the market, it’s called opening odds. The opening odds are based on the betting company’s analysis of past statistics, as well as other factors, such as injuries, match-bans etc. The opening odds rarely match the actual likelihood of the outcome of the match, as the betting companies often lack information that will show between the time the odds are released and the match start. Often, the betting company will release the odds a week before the match start. In this time a lot can happen which means the betting company have to adjust their odds continuously after receiving new information as well looking at how the market is reacting.
The closing odds are based on how the market has reacted to all available information, statistics and news about the team that has been received in the time between the original odds being released and the match start.
The odds offered by the betting company just before the match start are called closing odds. The closing odds are based on how the market has reacted to all available information, statistics and news about the team that has been received in the time between the original odds being released and the match start. That is why the closing odds are significantly more researched and accurate compared to opening odds. The closing odds at large betting companies like Pinnacle and Betfair have shown that they are very good indicators of what the actual outcome of a match will be.
Rafael Nadal will meet Roger Federer in a Grand slam final. The opening odds are released five days before the match start and the opening odds are 1.80 for Nadal and 2.10 for Federer. During these five days, Nadal will have a problem with his knee, something that was not known when the betting company released the opening odds. Nadal’s problem with his knee reduces his chances of winning the match and the closing odds when the match begins is 2.20 for Nadal and 1.90 for Federer.
Odds movements are, believe it or not, about how odds drift from when they are released to just before the match start. To be able to follow odds movements and analyse the meaning of certain movements is an important skill if you are to become a successful player in the odds market. Odds movements are adjusted by the betting companies depending on how the market betting is being placed so that they don’t leave themselves exposed to any potential outcome. In other words, if there is a lot of money on one side, the odds will be dropped on that side and lifted on the other to smooth out all the money.
If for any reason, a betting company would offer misjudged opening odds, the odds will be adjusted by the betters until the odds are at the correct market value. If you place a bet with the opening odds, you can follow the odds movements from your original bet to the closing odds to gain an understanding of how correct you were with your bet. The relationship between the odds you have played on and the closing odds is a good indicator of your expected return, also called an expected value.
Wisdom of the crowd
The fact that the closing odds are more accurate in comparison with the opening odds is due to the fact that the market is what decides the closing odds. Therefore, the market has a better knowledge than the company setting the odds has in the opening phase. The concept ‘wisdom of the crowd’ can be easily explained by the fact that the masses will be closer to the correct result than an individual expert's guess.
The larger the market, the greater the likelihood of the closing odds being correct and that is why it is more difficult to be in the black in larger odds markets.
But with that said, the importance of beating the final odds in a large market, such as the Premier League or the NHL is significantly more important than beating the final odds in, for example, floor hockey. Since the market for floor hockey is very small, with low turnovers and low limitations, the mass and the major players won’t enter the market. However, if you bet on a league like the Premier League then you are playing against the largest market and against the biggest players in the industry. Betting is not just about beating the betting companies’ margins but also about beating the market.
The expected value is the average expected return for each bet. The expected value is an important subject within probability theory and is best described as the amount you expect to win or lose for repeated infinite occurrences involving luck. Do you have a positive or negative expected value? This is a question that could decide if you are a winning or losing gambler in the long run. An easy way to get a better understanding of expected value is the classic method of a coin toss.
Assuming that you have a 50% chance of it being either heads or tails, you need odds of higher than 2.00 to get a positive expected value. If you are betting on a coin toss, with odds of below 2.00, you have a negative expected value.
If you were to have odds of 2.10, you will have a positive expectation for your bet. So, for every £/€ 10 you invest, you can expect to get 50 pence/cents back in winnings. With that said, this does not mean that all bets will result in a win. After 50 coin tosses, you could well be behind, despite having a positive expected outcome. However, in the long-run, let us say after 1,000 coin tosses, you will in the greatest probability, be in the black as your expected value was positive.
Calculating the expected value for a match:
To calculate the expected value for a match, you can keep it simple with this formula. What you need to find out is the odds of an outcome and calculate its probability. It is easily done by dividing 1 with the odds. So if the odds are 2.20 the likelihood is 45%. 1 / 2.20 = 0.45 = 45%
Formula for calculating the expected value in a match:
(Likelihood of winning) x (Winning amount per bet) – (Likelihood of losing) x (Lost amount per bet)
You have thought about betting on Sunderland to win away at Chelsea. The odds are 1.20 for Chelsea to win, 6.50 for a draw and 17.00 for Sunderland to win. A bet of £/€50 on Sunderland will give £/€800 in profit. The likelihood of you winning is 1/17 = 0.58 = 5.8 %. The likelihood that Sunderland will not win is the amount between a Chelsea win (0.83) and a draw (0,15). Which means that the likelihood that Sunderland will not win is 0.83+0.15 = 0.98 = 98%.
If we put this as a formula, it would look like this:
(0.058 x £/€800) – (0.98 x £/€50) = - £/€26.
Therefore the expected value is negative (£/€-2.6) and you can expect a loss if you bet on a Sunderland win with those odds in the long run.
What can we learn from this?
What we can learn from this is that the key to success is not dependent on individual results, which are largely about good or bad luck. Instead, it is important to find bets that have a positive expected value in order to be a winner in the long-run. Finding bets with a positive expected value is no guarantee of success when betting on individual matches. However, in the long run, it will increase your chances significantly.
What we can learn from this is that the key to success is not dependent on individual results, which are largely about good or bad luck.
You should think about whether your gambling is only dependant on luck or if your bets are dependent on your skill. By looking at how often you beat the odds, you can work out if your betting is down to luck or skill. Betting is not about what you think will win; it is about how likely you think something will win versus the odds on offer.