Value Betting - Guide for Beginners

I wrote an article for about value betting. It should be useful for beginners, but interesting for everyone. Enjoy...

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Value betting is pretty new concept based on the assumption some teams are overpriced or underpriced by bookmakers. There are always plenty of arguing between supporters and opponents of this concept. One side says betting on unfair prices is nothing else than giving your hard earned money directly into bookies’ full pockets. Other group points irrelevance of 0.05-0.10 odds difference and states that human brain is not a Deep Blue computer to make a difference between 65% and 66% (for example) possibility of winning. So, which group is right?
Understanding the concept
To understand the basic concept of value betting, first you must understand how betting market works in general. Probably the best example for explanation is tossing of a coin. There are always two possible outcomes - heads and tails. So, there is 50% of probability for both. Converting that in odds, we get 2.00 (I’ll use decimal odds format) and that would be a fair odd. If you toss a coin 1000 times, you will get 500 times each of two outcomes. Maybe few times less or more than that, but your balance would be around zero. Now imagine two guys who make an online bet and put $50 dollars on it, both. One of them loses $50, other wins $100? Well, no. In that case bookmaker would not get anything and their existence is based on profit (huge profit, that is why their number is countless nowadays). It is not a steal (not yet, at least), that’s how the whole industry works. So they won’t offer 2.00, but 1.90 (for example). New situation is next, one bettor will lost $50, other will get $95 and bookie will have guaranteed $5 of each bet. Now, let’s imagine 1000 bets. You will invest $50.000 and as it’s predictable you will win 500 times. But instead $50 (single bet) x 2.00 (fair odd) x 500 (number of winning bets) = $50.000 (zero profit), you’ll get only 50 x 1.90 (market odd) x 500 = $47.500! Bookmaker’s services, remember? What about if some bookie, because the lack of competition, impudently offers you 1.85 for the same bet? Short answer, he will get additional $1.250 bonus for the services (50 x 1.85 x 500 = 46.250)! If you don’t care about 0.05 difference (despite it looks so irrelevant), you will be making an extra tip to the bookie.

How it really works?

Now, I'll convert this into real betting. What is a basketball spread betting (or Asian handicaps in football) other than two outcomes with same possibility? Bookmakers are hiring the best experts to make basketball offer that rates chances of both teams with 50%. Margin, for example, is -5.5 on team A. They will win with 6 or more, or will not. Our fair odd should be 2.00, in reality they are 1.85 - 1.95. If you decide to test your luck in betting for one weekend, it’s not a big deal. If you are in the betting world for few years or more, you would be probably shocked if realize how much money you have wasted just because not paying attention on 0.05 difference. Now, you are starting to scratch your head. On the betting market, 99% of bettors are losing their money and just 1% winning at the long-term. Pay attention where you are placing your bets. Best possible advice is to make several accounts at different books and choose the best odd for every event.

Now I come to the point where supporters and opponents of value betting start clamoring. How to make decision is there any value in some odd and does it worth of a bet?! For this purpose I'll include bets with three possible outcomes, a typical 1X2 betting in football games (as at two outcomes, here is also bookies’ provision deducted from 100%). Let me make one example. In season 2009/10, Chelsea were priced 1.20 at home against Everton (that is usual price for Chelsea at home against any team out of top six). 1.20 odd means there is 83.33% of chance it will be a home win. Chelsea were the strongest team in Premier League, no injuries, no mercy at Stamford Bridge. Everton had long injury list and big crisis in performance and results. So, does it worth of a bet? Opponent of value betting would say it is the easiest and fastest way to make 20% of profit. Safe as in the bank, but you get it for less than two hours! Supporter will ask him: “Would you bet on it if there is 1.01 odd instead 1.20?! One percent is still good for 120 minutes!” Hmm... If you wish to bet on such low odds, you have to be aware of this. Betting on 1.20 actually means you have to make a streak of 5 consecutive wins to avoid loss. Winning bet of $100 stake on 1.20 brings you $20 of profit. If you lose only one of five, you will be in deficit. Now, look at the history of Chelsea - Everton meetings at Stamford Bridge. Last five ended with only two home wins and three draws! Opponent is in trouble and his bank is broke.

Calculating the value

There are many different ways for calculating the value. One group are math experts and use complicated methods for calculation the fair odds. Even I made once a formula for calculation Asian handicaps. After "only" about half an hour, I could tell you is it better to take -0.75 or -1.0 handicap, where's a better value and where bookie made a mistake. All of my methodology crashed like a house of cards when I realized that 5% difference in my assumption about possibility causes changing the “fair odd” for 0.15! If I say there is 60% of possibility Liverpool will defeat Aston Villa at home, odd should be 1.67. With 65%, it should be 1.53! So, how the hell I should know is it 60%, or 65%?! Other group of supporters use statistical methods, based on history results. On that way they calculate possibility of future results and are finding the value. I have not investigated these methods. Football is not the same game like before 20 years, why results should be?

My warmly advice to all beginners is to pay attention on the price at the same way as you do about the outcomes. You are pretty sure Liverpool will defeat Villa? Fine. Now, look at the offer. 1.40? That's pity. Leave it and don’t think about that game again. Continue with the researching and you’ll find another game with acceptable odd. After few years of betting you will get a sense for value and fair odds and your hard work will start to pay off.