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Horse Racing The Education Of A Safer Gambler
There are many tools, apps and resources available to help bettors to gamble safer . But one aspect of the safer gambler that is often overlooked is an understanding of basic betting fundamentals.
While there is no guarantee, an educated bettor is more likely to be a safer one. And by educated, we mean being able to answer the following questions:
- What is betting value?
- What are bookmaker margins?
- What is a sensible stake size for any bet?
I know from personal experience, my betting changed dramatically once I understood the basic principles of disciplined betting. I became much more conservative and developed a genuine distaste for reckless wagering.
And I know from those I have helped educate, their betting changed once they understood that they would not ‘get rich quick’ through betting.
In this article, I will take you through the basics of sports betting with the aim of helping you the reader bet more safely.
What is betting value?
A value bet is a bet where the likelihood of the outcome is greater than the likelihood reflected in the betting odds.
So let’s say we have a coin toss. There is a 50% chance the coin will land on heads and a 50% chance the coin will land on tails.
If we were offered odds of 1.90 for heads, would this be a value bet?
We can determine this by calculating what is known as the implied probability of the odds. This is a simple calculation:
1 / Decimal Odds
So, what is the implied probability of odds 1.90?
1 / 1.90 = 0.5263
The implied probability of odds 1.90 is 52.63%.
So are the odds of the coin landing on heads presenting a value bet?
No. Why?
Because the probability of the coin landing on heads is 50%. The implied probability reflected in the odds of 1.90 is 52.63%.
Whenever the probability of an outcome is less than the implied probability in the odds, we do not have a value bet. Whenever this is the case, we should not place a bet.
The Reality of Value Betting
This is all fine in theory. What about the reality? The reality is that value bets are very difficult to find.
Why?
Firstly, bookmakers invest an incredible amount of resources to determine odds that accurately reflect the outcomes of upcoming sporting events. Bookmaker odds are therefore very difficult to beat long term.
Secondly, bookmakers also do not offer what is known as a fair market. They add what is known as the margin. We will get to this later in the article.
Determining whether or not odds reflect value is easy when we know for a fact what the probabilities of the outcomes are. We know with any coin toss, there is a 50% chance the coin will land on heads and a 50% chance it will land tails. When it comes to sporting events, the probabilities are far more difficult to determine, if at all.
What are bookmaker margins?
Simply put, bookmaker margins are how bookmakers make their money. A little more precisely it is how bookmakers protect themselves against bettors who are able to better assess probabilities in given betting markets.
Bookmakers will never offer what is referred to as a ‘fair market’. A fair market is where the implied probability of the odds equals 100%.
So for example, a fair market for a coin toss of heads or tails would be odds of 2.00 for heads and odds of 2.00 for tails. With the odds of 2.00 for heads reflecting an implied probability of 50% and the odds of 2.00 for tails reflecting an implied probability of 50%. In total, the market is 100%.
But a bookmaker will never offer these odds. Instead, they will offer odds of 1.90 for heads and 1.90 for tails.
In this case, if the bookmaker takes £100 worth of bets on heads at odds of 1.90 and £100 of bets on tails at odds of 1.90, the bookmaker is guaranteed a profit regardless of the outcome.
If heads wins, they pay out £90 to those who bet on heads while keeping the £100 they took for bets on tails, ensuring a profit for them of £10.
Now this is obviously a very simplistic example. But the point is valid. Bookmakers take a cut out of the odds they offer to ensure they make a profit regardless of the outcome.
The Reality of Bookmaker Margins
Bookmaker margins are what makes finding value bets so difficult. It would be one thing to find value if a fair market was on offer. It is another thing altogether to find value when the odds being offered do not equate to 100%.
Look at it this way. Let’s say we wanted to bet on heads on coin tosses at odds of 1.90.
The implied probability of odds 1.90 is 52.63%. To find a value bet we would have to find a situation where the coin landing on heads is greater than 52.63%. Could we find such situations?
Well, with a complex enough analysis of all sorts of physics, I suppose we theoretically could. But in all seriousness, no.
What is a sensible bet stake?
Not to make assumptions, but a sensible bet stake is much smaller than you likely would like to believe. Most serious bettors use a conservative variation of the Kelly Criterion to determine their bet stake.
The Kelly Criterion is applied to make the most of both the value available in a given bet but more importantly it is used to minimize the risk of reducing a bankroll to nothing.
The Kelly Criterion is calculated as:
value / (odds – 1)
So if we have a value of 5% and odds of 2.10, how much should we stake on the bet?
0.05 / (2.10 -1)
0.05 / 1.1 = 0.0455
In this case, the Kelly Criterion suggests we bet 4.55% of our bankroll.
Now, most serious bettors do not use a straight up Kelly stake. They will instead use a percentage of the suggested stake. For example, it may be 10%. Meaning that we would then bet 10% of 4.55%, meaning would we then bet 0.455% of our bankroll. If our total bankroll is £1000, we would bet just £4.55.
The Reality of Bankroll Betting
Many novices have dreams of becoming professional bettors and making a genuine living income through their betting.
But the reality is that this is very unlikely.
Let’s just run some basic numbers to demonstrate. Let’s say you have the following:
- Bankroll £1,000
- Value bets per year 1000
- 5% value per bet
- Each bet has odds of 1.90
Over the course of the year, we would place 1000 bets at a suggested stake size of £5.55 per bet. A total investment of £5,550.
Based on the value of 5% and odds of 1.90, the probability of each bet winning is 55.3%.
So, 1000 bets at a stake of £5.55,
Given the win probability, 553 of these 1000 bets would be winners.
This would provide us with a return of £5,831.39. Subtracting our investment of £5,550 we earn a profit of £281.39.
So with a bankroll of £1000 and 1000 bets each at a value of 5%, we would make a profit of just £281.39.
So then ok. Let’s say we want to make a living from this betting. If we wanted to receive an income of £50,000 a year, our initial bankroll would need to be £177,689.
How many of you reading this have a bankroll of £177,689?
And if you did, would you really invest it in betting?
The Reality of Betting On Sports
Firstly there is the issue of assessing the actual probability of a given outcome accurately.
Secondly, the probability of the outcome must exceed the implied probability of the odds, odds that do not reflect a fair market.
And thirdly, even if you can achieve both of these, can you do so at a rate and with a bankroll that will make it worth your while?
Sports betting is fun and a great way to engage with your favourite sport and enjoy with your friends.
But if you think you’re going to make easy money and get rich quick betting on sports, you’re sadly mistaken. Believing so is foolish.
Good luck, bet with discipline and most of all, bet safe.
If you or someone you know has a gambling disorder, please visit:
Or if you are in the UK, free call the National Gambling Helpline on 0808 8020 133
Safer Gambling Week at bettingexpert
