Value Betting
We went off piste last month with a quick look at tricks our own mind can play on us when betting for profit, the cognitive biases that will try their best to derail us on our journey. This month we are back to basics examining another of the pillars we need to put in place if we aspire to make our betting pay.
Today we look at value betting and how crucial it is if we want to turn a profit
It beggars’ belief that, even in this day and age, there are people out there who will tell you that the only important thing in betting is finding winners. That the price of the winners Is unimportant and that we should always be looking to find the winner at the expense of all other considerations.
Those people will tell you it was as if you back the winner in coin toss at less than even money, ignoring the little fact that you will end up broke very quicky following such a strategy even though you will back a lot of winners.
Those people are idiots, listen to them at your peril.
Trying to back winners regardless of price in the end will leave you wondering why you have empty pockets despite placing all those winning bets.
Anybody that makes a long term profit from betting is value betting whether they know it or not.
I know if you are reading this magazine, you understand exactly what value betting is but, in the interests of getting the basics right, let’s cover that ground just one more time.
So, what is value betting?
Value Betting is betting only when you have calculated (using one of many, many methods that we can specialise in) that the price being offered on your selection is greater than the true probability of it winning.
In value betting you are not looking for the most likely winner (though sometimes you can find value on the most likely winner which is the best of all possible worlds!).
You are simply looking for a selection whose chance of winning has been mispriced on the high side.
A good way to demonstrate the importance of securing value is with a series of coin tosses – an event with a nice, fixed probability for each potential outcome. As long as the coin is straight, either outcome is equally likely for a true probability of 50% or 2.0 expressed in decimal odds
Knowing that the true probability is 2.0, you would be very foolish to accept any odds below 2.0 for either outcome.
Conversely if somebody were stupid enough to offer you 2.1 on heads coming up, that would be a value bet.
You are receiving higher odds than the true odds of heads occurring.
If you take that bet 1000 times, you are absolutely guaranteed to make money as in the worked example below:
1000 coin tosses.
The outcome will be close to 500 heads and 500 tails (though variance will cause the actual results to fall slightly either side of the expected 50/50 occurrence over such a relatively small sample – as the sample gets larger the closer you will get to that 50/50 occurrence of heads and tails)
500 bets of £1 on tails loses you £500
500 bets of £1 on heads returns you £550 (500*1.1)
A guaranteed profit of £50 secured solely by taking a value price on your bet.
Now, it’s pretty unlikely you will find anybody prepared to offer you 2.1 on any side of a coin toss!
The true probabilities are too obvious and defined and offering odds that vary from those easily determined true probabilities will result in you either going bust or nobody taking you up on your offer.
Value Betting in Horse Racing
However, it’s a different matter altogether when looking at an event where the probabilities are not so clearly defined or simple to calculate.
A horse race for example.
In a horse race there are a huge number of variables that can influence the final result – ground conditions, fitness, class, stamina, pace, speed, determination, draw, jumping ability, toughness, breeding – on and on ad infinitum.
There is room for substantial differences of opinion when assessing the true probability of each runner winning and it’s much more difficult for a bookmaker to set their odds with real accuracy.
The true probabilities are a matter of opinion and with hard work and experience your opinion of true probability can be more accurate than the bookmaker’s.
In the early betting markets, before the wisdom of the crowd has worked its magic and shaped the odds into a very hard to beat guide to the true probabilities (something we will look at in more detail in next month’s article), you are presented with odds that represent just the initial opinion of the bookmaker.
And, luckily for us, that initial opinion is not infallible and is often a fairly long way from representing the true probability of any particular outcome.
Errors in analysis are bound to occur when providing odds on thousands of events each and day.
And those errors can be fairly easily spotted by a bettor with a good knowledge and speciality in analysing just one particular type of event, be that a big field handicap hurdle or a Belarussian Women’s Handball National Cup match.
The bookmaker’s business model requires them to offer odds on thousands of events each day. They can’t be experts in all those events.
As an expert in one specialist field, you are at a massive advantage over a bookmaker whose resources are spread thin across thousands of sports and markets.
You, as a bettor, can find easily find betting value by either developing your own knowledge and experience in just one particular type of event or by tapping into the expertise of a tipster who has already developed that knowledge and experience.
With that expertise, you are at a massive advantage over a bookmaker whose resources are spread thin across thousands of specialisms.
To summarise:
Getting value on your bets is more important in long term profit than finding winners. Get the value and the winners will look after themselves.
Complex sporting events are inherently difficult to predict with accuracy. This difficulty provides you with an opportunity.
Betting into immature betting markets means you are betting directly against the opinion of the bookmaker.
Specialising (or hiring a specialist) will make your opinion more accurate in the long term than the bookmaker who needs to be an expert in thousands of sports.
In next month’s article we will take a look at a quicker, easier way to identify value that uses direct analysis of the betting markets as opposed to analysis the fundamentals of the event you are betting on.
This quicker, easier way enables (even with zero specialist knowledge of the event you are betting on) to identify hundred or even thousands of value betting opportunities every day in any of the markets that bookmakers offer.
Have a great month and be lucky.
Kieran Ward
