What is value betting?

 

If the bookmaker's odds are unfair, how can a punter ever win? Given the disadvantage the spread imposes, it is no surprise that as many as 95% of gamblers fail to win at fixed odds sports betting over the long term. There is no denying that most bookmakers, particularly the well-established firms, are very good at setting prices, estimating the true chance of sporting results and locking in a profit margin.

 

Nevertheless, sports are not statistically quantifiable, in the sense that cards or other forms of casino gambling are, where simple laws of probability govern the outcome of games like blackjack, roulette and craps. I know that I have a 1/37 chance of landing a number 36 on a European roulette wheel (1/38 chance on an American wheel). But how can I know what the true probability is of Roger Federer winning the Wimbledon Tennis again? And if I think I know what his chances are, how can I be sure that my estimate is more accurate than the bookmaker's?

 

Unfortunately, the answers to these questions only come with time and experience, by acquiring a "knowledge" of a sport and its betting market, and a familiarity with the way bookmakers set their odds. The good news, however, is that whilst bookmakers are very good at setting odds for sporting events, they, like punters, can make mistakes, sometimes very glaring ones, which knowledgeable bettors will snap up without a moment's hesitation. Ladbrokes, for example, astonishingly offered 150/1 on Primoz Peterka, the back-in-form Slovenian ski jumper, to win the opening ski jumping World Cup competition of the 2002/03 season at Kuusamo, Finland, despite the fact that he had won the qualifying competition the night before, and had been double world champion in previous seasons. The true odds, by contrast, were likely to be nearer to 10/1, and most other bookmakers had priced accordingly. Primoz Peterka won, and Ladbrokes ceased offering odds for the ski jumping World Cup thereafter. Of course, such large mistakes are relatively rare, but smaller pricing errors do and must exist to account for the few per cent of gamblers who are profiting regularly from fixed odds sports betting.

 

Punters differ in the methods they use to acquire a sports betting "knowledge". Some like to adopt a more mathematical approach by using rating systems based on past performance to predict future outcomes. Others spend hours each week poring over sports journals and Internet sites to glean as much information as they can about a particular event, including news about the weather, and team or player injuries and morale. Still others base their judgement on a subjective feel for the forthcoming event, relying on an inkling or a hunch about what may happen. And finally there are punters who simply pay others to do the thinking for them, by subscribing to one or more sports advisory services.

 

There is no right or wrong approach to seeking a betting edge. Ultimately, the best one is the one that works for you, one that returns a profit. However, what each approach has in common is a shared aim of finding "value" in the odds, where the true chance of a win is greater than that estimated by the bookmaker. Many punters fail to appreciate the importance of value betting, preferring to subscribe to the "back winners, not losers" school of gambling. Betting on Manchester United at Old Trafford to beat Watford at 3/11, it might be argued, is surely preferable to betting on Watford to beat Manchester United at 17/2, even if the bookie has restricted Manchester United's odds but been generous with Watford's. Manchester United, simply, are too good, however poor the price.

 

This analysis is confused because the punter has failed to assess Manchester United’s chance of a win in probabilistic terms, but instead rather simply by whether he thinks they will or won't be victorious. "Winners" cannot win all the time, no matter how much a punter is convinced that they can. The important question a punter should instead be asking is whether the true chance of a winner is greater than that which the bookmaker has unfairly (in his mind), but potentially mistakenly (in the punter's mind), estimated it to be. In other words, is the bookmaker's price greater than that which the punter considers to be the fair price? If it is, then he has found betting value, provided he can estimate prices better than the bookmaker, of course.

 

A value bettor will be generally unconcerned about backing the underdog, or perhaps more relevantly backing a team which he thinks will not win (underdog or not), provided there is value in the bookmaker's odds. A value bettor estimating the likelihood for the Manchester United win to be 80%, with a 10% chance of a Sunderland win would back the away team, despite believing that Manchester United should win. According to these estimations, the fair odds for the two teams are 1.27 and 9.50 respectively.

 

Since odds are just probabilities, value betting offers really the only way to beat the bookmaker. A punter can back as many "winners" as he likes, but if he fails to take into account the bookmaker's prices, it may not be enough to return a profit. There will always be some losers. Really, the argument about value betting is a hypothetical one. The "back winners, not losers" philosophy is itself inherently all about finding a betting edge. If a punter is finding winners and making a profit with them, it means simply that he is winning more bets than the bookmaker believes the punter ought to be winning, according to the odds the bookmaker had set. If this is the case, the punter has found value and established a betting edge, whether he quantitatively set out to do so or just followed his hunches. Successful betting, then, is really all about understanding and managing probabilities. Know the true chances of a sporting win, and there may be profitable opportunities waiting at the bookmakers. As Geoff Harvey says in his book Successful Football Betting, "Find the value, [and] the winners will take care of themselves."

by Joseph Buchdahl, published By High Stakes Ltd., London.

 

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