The betting industry in the UK alone was worth £14.5 billion in the 12 months between October 2017 and September 2018. From what was once a pastime primarily practised in secret due to its dubious reputation, gambling has now become a societal norm. The industry’s advertising is almost ubiquitous, as is evidenced by the extraordinary number of adverts on TV, radio, online, and even on billboards at the side of football grounds.
It is said that ‘the house always wins’. In reality, fewer than 10% of bettors (some say even fewer) make a long-term profit. These days, those that beat the bookies, usually find their accounts restricted. Ultimately then, the house DOES seem to find a way to win, by fair means or foul.
Those in the know realise that the ONLY way to win long-term is to find value bets. Sadly, the majority of bettors are barely aware of the concept, let alone its implementation. However, Mercurius Betting Intelligence is capable of dealing with the twin tasks of discovering value bets AND avoiding restriction. We provide you with the opportunity to allow us to do all the hard work. As Adam Kucharski points out: “Science and math are taking the luck out of gambling.”
As we aim to educate our users, rather than expecting them to join us blindly; we have developed a series of articles explaining concepts such as Value Betting, Arbitrage Betting, and Trading, while also providing you with information on how software and bots are widely used by professional bettors and traders. Ultimately, we believe that betting is an investment opportunity akin to the stock market. By the time you have finished reading our material, we hope you will agree.
Sports Betting - How Does it Work?
In basic terms, sports betting is the practice of wagering money on the outcome of a sporting event. Mankind has been gambling for millennia. For example, archaeologists found six-sided dice used by the Mesopotamians over 5,000 years ago!
A ‘bet’ is an agreement between two parties. The party that makes an incorrect prediction forfeits something stipulated to the other. When you place a bet, you predict an outcome at predefined odds. The traditional form of betting involves the bookmaker against the punter, but the Betfair Exchange, and others like it, have changed the game completely.
Now, you can wager against other players who ‘back’ or ‘lay’ an event at odds they choose. For the record, a ‘back’ bet on an exchange means you believe the event will occur. A ‘lay’ bet means you bet against the outcome.
When you place a bet, you do so at specific odds which are based on the likelihood of the event occurring (or not in the case of the Exchange). To keep things simple, we will focus solely on ‘back’ bets for the duration of this article. The ‘odds’ of a bet are supposed to represent the chances of something happening, and are based on probability.
Types of Odds
In the main, there are three types of betting odds used by bookmakers:
Also known as ‘European’ odds, decimal odds are widely used by European, Australian, and Canadian betting companies. Calculating potential winnings is easy with decimal odds. Simply multiply your stake by the decimal odds and then subtract your initial stake to get the potential profit.
In the above example, you can get odds of 3.75 on a draw between Agsu and Sabail II in the Azerbaijani second division. A £20 wager at these odds equates to:
3.75 x 20 = 75
75 - 20 = 55
You make a profit of £55 if the match ends in a draw, and lose all £20 if either team wins. For the record, odds of 2.00 equate to an ‘Even Money’ bet. In other words, you will double your money on a successful bet at odds of 2.00.
The ‘classic’ odds type is still widely used in the UK and Ireland. Using the example above, decimal odds of 3.75 are shown as 11/4 in fractional terms.
In the example above from the Armenia Premier League, you can see that FC Noah, the home team, is available at odds of 7/5 to win. The away side, FC Urartu, are 15/8 to win, and the Draw is available at odds of 2/1.
It is a little trickier to calculate fractional odds. Multiply your stake by the figure on the left-hand side of the odds, and divide that number it by the figure on the right-hand side. If you bet £20 on FC Noah at odds of 7/5, here is how you calculate your potential winnings:
20 x 7 = 140
140/5 = 28
20 + 28 = 48
If you win, you receive a total of £48, £28 of which is profit because you subtract your initial stake.
To everyone outside North America, these odds seem extremely confusing at first but aren’t so bad when you know what is going on! Known as ‘Moneyline’ odds in the United States, American odds are represented by the amount of money you must wager to win $100 if the odds have a ‘minus’ symbol. If there is a ‘plus’ symbol, the figure represents your profit if you wager £100.
If you want to back the home side in this equation, 1074 Cankirispor, to win, you must bet £175 to make a profit of £100. When you divide 100 into 175, you get a figure of 0.57. Add 1.00 to get the fractional odds of 1.57, which in turn become 4/7 when you use fractional odds.
If you fancy an upset and believe Boyabat 1868 Spor can win, a £100 wager will result in a profit of £700 if you are right. This equates to 8.00 in decimal odds and 7/1 in fractional odds.
Bookmaker or Exchange?
Traditionally, it was always a case of placing your bets with a bookmaker. You made a wager on an outcome and received money if you won, and lost your stake if your wager was unsuccessful. The bookmaking industry is experiencing a boom, at least the established giants. This is primarily due to a lack of knowledge on behalf of a majority of punters.
While there is no issue with liquidity as long as you continue losing, it changes when you show competence in your betting, with the profits to prove it. As soon as this happens, a bookmaker will restrict your account, and there is no legislation to prevent them from doing this. At that point, you’ll only be able to bet tiny amounts of money.
At Mercurius, we use exchanges such as Betfair because there is no danger of being restricted for successful betting. Why? Exchanges involve you betting against other players. The likes of Betfair take a commission and win no matter what. We have found a method of utilising exchanges to our advantage by finding value bets.
Even when you take commission into account, you’ll usually find better odds on exchanges. Betfair is the #1 betting exchange in the world and is the one we use due to the incredible liquidity.
The above is a Europa League qualifying game; hardly the most glamourous of matches! However, five hours before the match and over £62,000 had already been wagered by punters on the ‘win’ market. The odds in blue are what is available right now. The figure beneath the odds reflects the amount of money waiting to be ‘matched’ at those odds.
As you can see, while there is ‘only’ £6 ready to be matched on a Rangers win at odds of 1.57, there is £1,545 available at odds of 1.55. A £200 wager on a Rangers win at odds of 1.56 would result in a profit of £112, less the Betfair commission which stands at 5% in the UK and Ireland, but is higher in other countries. The more you wager, the lower the commission gets, however.
How does the bookmaker win?
While the exchanges run on commission, bookmakers earn their profits through something called the ‘overround.’ In football, for example, the most popular market involves choosing a team to win. In this case, there are three types of odds: Home Win, Draw, and Away Win. The bookmaker needs the combined ‘book’ to add up to over 100%.
Here is a random Europa League qualifier to help you understand what the overround means. It is much easier to calculate when using decimal odds. To get the total book calculation, simply divide each of the market odds by 100, and add them together. In this example, there are three odds to consider:
- Apollon to win: 100/3.30 = 30.30
- Draw: 100/3.60 = 27.78
- PSV to win: 100/2.05 = 48.78
- Add the three figures: 30.30 + 27.78 + 48.78 = 106.86
Overall, the bookmaker has a whopping potential 6.86% edge on this market! Of course, this is only if betting volume is divided evenly between the three outcomes. Even so, it is clear that the bookie has a very nice edge.
Beating the Book With Arbitrage Betting
You will never beat the book using a single bookmaker as they will always have an edge. However, if you use multiple accounts, you could catch them out. The industry is fiercely competitive so companies compete to try and provide you with the best odds. Occasionally, a bookmaker makes a slight pricing error.
Arbitrage betting involves finding an instance where it is possible to make a profit regardless of the outcome. To do so, you must focus on markets with only two possible outcomes. Examples include the over/under goals market in soccer, or the winner of a tennis, darts, or snooker match.
There are several websites that provide you with arbing opportunities but act fast; they don’t last! The examples above come from wettportal.com.
Let’s check out the darts match first. As you can see, there is the possibility of a 3.18% profit. There are also numerous arbitrage calculators online to choose from. In any case, you can earn a profit of £3.18 for every £100 you bet by doing the following:
- Bet £71.65 on Gary Robson at odds of 1.44 to win £103.18.
- Bet £28.35 on Joe Chaney at odds of 3.64 to win £103.18.
- You win £103.18 from a £100 stake no matter the outcome.
In example 2, it is more complicated as there are three markets. In this case, here is what you must do:
- Bet £78.65 on Real Madrid to win at odds of 1.30 to win £102.25.
- Bet £13.63 on a draw at odds of 7.50 to win £102.22.
- Bet £7.72 on UD Levante to win at odds of 13.25 to win £102.29.
- You win at least £102.22 from a £100 stake no matter the outcome.
There are two issues with arbitrage betting. First, you need a LOT of betting accounts. Second, you WILL be banned or restricted if a bookmaker suspects you are an ‘arber.’ Betting ‘uneven’ sums of money is a dead giveaway!
Who bets £78.65? Arbers! Rounding up your bets will keep you off the radar but will also reduce your profit.
What is Value Betting?
It is the practice of finding a bet at odds that give you the ‘edge’ over the bookmaker. If there is a much better chance of an event occurring than what the bookie’s odds say, you have a ‘value’ bet.
For instance, the bookmaker has offered odds of 2.50 on Arsenal to beat Manchester United. The implied probability of this event occurring is 100/2.50 - 40. In other words, the bookmaker says Arsenal have a 40% chance of winning the match. If the chances of Arsenal winning are 45%, you have an ‘edge’ because the ‘real’ odds should be 100/45 = 2.22.
If you consistently bet at odds of 2.50 when the real odds should be 2.22, you will make a profit in the long-term. It is much easier said than done! Bookmakers use complicated software to compile their odds lines. However, so do we!
To truly find value bets, you must understand Expected Value.
What is Expected Value?
A bet’s expected value (EV) shows the amount you ‘expect’ to win per bet on average. It relates to how much you would win or lose if you were to place the same bet over and over again.
The all-time classic example is calculating the odds of a coin toss. Assuming the coin isn’t in any way biased, there is an Even money (decimal odds of 2.00) chance of calling ‘heads’ or ‘tails’ correctly. If you get odds of 2.05 on either heads or tails, you have a value bet because the odds you receive represent a greater chance of winning than the true probability.
There is a fairly simple formula we can use:(Probability of winning) x (Size of wager) - (Probability of losing) x (Amount lost per wager)
Let’s look at it in practice.
- £10 on Spartak Moscow to win at odds of 2.15 provides a potential profit of £11.50.
- £10 on the draw at odds of 3.50 provides a potential profit of £25.
- £10 on Braga to win at odds of 3.20 provides a potential profit of £22.
We’ll use the bet on Spartak Moscow for our calculation. The probability of a home win according to the odds on offer is 100/2.15 = 46.51%, or 0.4651.
The probability of this NOT happening is the sum of the draw and a Braga win which is (0.2857 + 0.3125 = 0.5982). Using our Expected Value formula:
(0.4651 x 11.50) - (0.5982 x 10)
5.3487 - 5.9820 = -0.6333
Betting on Spartak Moscow to win will cause you to lose slightly more than £0.63 for every £10 staked.
It is crucial to note that a negative EV doesn’t necessarily mean you will lose in the long-term. When it comes to an event such as tossing a coin, the odds are ‘built-in’ unless there is something seriously wrong. The odds of getting a coin toss right should be 2.00 unless the coin is damaged or has been tampered with. Likewise, the odds of guessing the right number on any roulette wheel with a single zero should be 38.00 unless the wheel has been rigged.
There is a rather complex definition of ‘true’ probability that may give non-statisticians migraines! Don’t worry; we’re going to keep it much simpler and relate it to sports betting!
Unlike a coin toss or roulette wheel, the odds available on sports betting are highly subjective. You will almost always find a slight discrepancy in the odds of the dozens of bookmakers no matter the market. Then there is the small matter of bookmakers changing odds to reduce their liability.
If a lot of money is placed on an event, a bookmaker must cut the odds to balance its books. Otherwise, it could be badly burdened if the outcome goes against it. While you are still betting against the bookmaker; in such instances, you are also betting against fellow punters if you believe their money is ill-placed.
Websites such as Oddschecker allow you to compare odds across a multitude of bookmakers. Above, you can see that Molde are 1/1 (2.00 in decimal) to win with Betway but are 5/6 (1.83) to win with Paddy Power. That is a significant discrepancy. If looking to make money from value bets, it is essential to shop around.
Despite what we said about the negative EV unless there is a bookmaker mistake, you need a positive EV for long-term value.
As far as bookmakers are concerned, the closest you get to a ‘coin toss’ scenario is when they offer odds on markets such as odd/even goals, or the Asian handicap or Asian goals markets. The Asian markets are the playground of professionals who like to stick with a binary option. The bookmaker overround is usually at its lowest for these markets.
The Asian goal line of over 2.5 goals in the Southampton and Manchester United game only offers an overround of 2.57%. Go to Pinnacle, and you’ll see overrounds of below 1% quite often. Pinnacle is often cited as the ‘gold standard’ of odds compiling, yet at Mercurius our edge over Pinnacle’s closing odds is 5.91% on average!
Value Betting Strategies
There are three relevant value betting strategies; all of which involve calculating the ‘true probability’ of an event and determining whether you are receiving a positive or negative EV. We explore this subject in greater detail in another article, but here is a brief overview.
Based on Market Odds
In an efficient market, value wouldn’t exist, and neither would arbitrage betting. Fortunately, bookmakers don’t always get it right. One of the keys to winning is to find markets with a relatively small overround. Asian markets work well for this purpose.
Another smart tactic is to find bookmakers known for being extremely good at compiling odds for specific events. Also known as ‘sharps,’ you can use these firms as your ‘base’ odds and look for less efficient bookmakers who provide you with significantly more generous odds in a market that already has a fairly low overround.
Based on Analysis of the Event
Aside from market odds, a fundamental method of finding value bets is to have as thorough an understanding of the sport, or better yet, a niche aspect of the sport, as possible. Professional tipsters make their living from being an ‘oracle’ on a certain market within a sport. Some are better than others!
If you intend to make a decent profit from sports betting, we recommend narrowing your focus. You can become an expert on finding matches with lots of goals in the Finland Kolmonen (Fourth division) football league, or learn how to play the Asian goals market like a fiddle in the German third division.
No matter what path you choose, detailed research and dedication are crucial; or else you’ll lose money in the long-run. Knowledge of a chosen market is necessary, and the only way to achieve this (without software) is with time!
You must also discover how to transform the data you glean into odds. For the record, this process is known as ‘creating an odds tissue’ and involves using the factors in your analysis to determine the ‘true’ probability of an outcome.
Based on Cognitive Bias
Examples of cognitive bias in betting include Gambler’s Fallacy, Optimism Bias, Ratio Bias, and even a tendency to not bet on the outcome you prefer! Horse racing is predominantly a male sport, and even today, female jockeys are underrated. Rather than focusing on the chances of the horse, chauvinistic punters refuse what is otherwise a value bet because of the female jockey! This is in spite of detailed research proving that female riders are as good as their male counterparts.
When you avoid cognitive bias, you bring your thinking to an entirely new level. There are no biases and no emotional attachments; just a dedication to winning based on what the data tells you, and nothing more.
What Are the Risks Involved in Value Betting?
Although Value Betting is arguably the #1 method of wagering on sports, it isn’t perfect. If it was, the bookmakers would be bankrupt, and no one would be able to use them! Here are the main concerns:
First and foremost, value betting depends on your reading of the event and of the market odds. Get either one wrong, and you have a problem! Also, market volatility can place havoc with your bets, especially when trying to place them in-play. An event such as a goal or sending off can majorly impact the odds. If you don’t place your bet in time, you lose the opportunity altogether because the value is gone. Volatility can also wreck a bet with positive EV because it can transform a bet based on logic and good data, into one based on luck.
Full focus is required at all times. A misclick can have dire consequences! Imagine betting £2000 instead of £200! Betting markets have time delays to protect the bookmaker, so you have to bear that in mind. Finally, if using an exchange, you need the right level of liquidity to place a large enough bet.
Your bank may not allow you to use an account for betting. Also, bookmakers love banning or restricting the accounts of competent bettors. If you show an ability to pick value bets, you WILL be restricted and will have to open new betting accounts.
Value Betting Compared to Matched Betting, Arbitrage Betting, & Sports Trading
|Value Betting||Finding bets at better odds than probability implies||
|Matched Betting||Using promotional offers from bookmakers to make a quick and risk-free profit.||
|Arbitrage Betting||Uncovering ‘mistakes’ in a betting market. Involves analysing multiple bookmakers to find bets with a guaranteed win regardless of outcome.||
|Sports Trading||Profiting from market movements. Involves judging the betting market on an exchange and knowing when to ‘back’ or ‘lay’ bets for a fast profit.||
Investing in Value Betting
If you learn the intricacies of value betting, it can become a genuine second income. At Mercurius, our average yearly gross Return on Capital (ROC) is 68% since the beginning of 2014. 2019 is a ‘slow’ year, but the ROC is almost 15% at the time of writing. These figures compare extremely well to a ‘typical’ investment.
In essence, a sound betting strategy such as value betting can provide you with a passive income to go along with the active income you earn from working. There are four ways in which you can make money from value betting. This is assuming that all of them are legal in your country.
Please check the rules are regulations according to where you live to ensure all of the following are legal. Mercurius takes no responsibility for any illegal activities conducted by bettors, knowingly or otherwise.
- Lend money to a friend who is a fantastic value bettor.
- Invest in a bot or create one yourself. The former is the only option if you don’t have the technical wizardry needed to create useful software.
- Become a shareholder in a company such as Mercurius which develops value betting related products! (We hope to offer this service sooner rather than later).
- Invest using Mercurius Tradr. Sign up and link your Betfair Exchange account to our software. You will benefit from a low joining fee and only pay money when you make a profit.
Rise of the Machines: Making Money From Value Betting Bots & Software
In theory, value betting software should make life incredibly easy. In practice, finding the right option is tricky. If it isn’t too expensive, it could potentially malfunction and cost you money. In general, there are four types of value betting software:
- Odds Comparison Software
- Tipping Software
- Bet Execution Software
- Fully Automated Built-in Strategy & Execution Software
The right software finds the best value bets and makes wagers based on your specifications.
Realistically, you need the aid of technology to win long-term. Not only do bookmakers have access to sophisticated software, so do many of your rivals on the exchanges! It is no exaggeration to say that without value betting automation, your chances of success are extremely slim.
You need a bot on the exchange because the market moves so quickly. A bot can be the difference between finding a value bet and losing the opportunity. The best bot types for value betting include:
- Data gathering scrapers.
- Crawlers for price comparisons.
- Iceberg bots to prevent odds moving against you.
- Predatory bots to help you find the best action.
By now, you probably think that value betting is a long and convoluted process. The thing is, we are only getting started with the explanation! If you like the sound of value betting, but don’t have the time, get in touch with the Mercurius team today and find out what we can do for you!