# Value betting: what it is and how it works

Are you tired of losing money via sports betting? Well, if you want to stop merely being an aficionado and become a true professional, you have to fully understand what a value bet and its expected value are.

## What is Value Betting?

Value betting is a systematic approach to sports betting. A value bet is a bet that has a better percentage of return than the expected risk. Often bettors are deceived by false myths and are in need of a systematic approach. So, how can you spot a value bet?

First of all, you need to understand the difference between the chances a team has to win and the corresponding odds. The odds are the price a bookmaker is willing to pay for winning bets, called payout. The bookmaker fixes the price according to the probability a team has of winning, the lower the odds, the higher the price. For example, a 2.4 odd means that the bookmaker will pay you a payout of2,4 times the stake you bet, with a net return of 1.4 times the initial stake.

### But how can you calculate the implied probability of the odds?

The probability of an odds is 100/the odds. Let’s make some examples!

- An odds of 2 means that the odds of winning amount to 50%. Why? Because 100/2 = 50
- An odd of 2.4 has a higher payout, but means that the probability of winning is lower: 41.6% because 100/2,4 = 41,6

## Fair value and true probability

Do the odds represent the true probability a team has of winning? No. Unfortunately, it isn't that simple. The probability we have just calculated is just the implied probability of the odds, that is the price a bookmaker is willing to pay. It’s correct to say that it is calculated according to the chances of victory, but it also takes into account the business model of the bookmaker, who fixes his prices in order to make them attractive for bettors, and market behaviours that makes prices increase or decrease over time. However, if you want to have a mathematical approach to betting, you also have to learn about fair odds, the theoretical odds which represent the true probability a team has of winning.

## How to identify value bets

A value bet is simply a bet where the likelihood of a given outcome is higher than what the odds offered reflect. This means that the expected return is statistically positive.

Value betting, therefore, means betting only when your chances of winning are higher than the bookmaker estimated.

Here’s the process, step by step:

- calculate the implied probability;
- calculate true probability and therefore the fair odds;
- apply the expected value formula and calculate the expected return;
- if the expected return is positive,a value bet has been found.

### Let’s make an example!

Let's say that Juventus is playing with odds of 3.6 to win.

An odd offered at 3.6 implies a probability of Juventus winning at 27.7% (100/3.6 = 27,7%).

However, according to the calculations, the chances of Juventus winning are about 45%, therefore the fair value of
the bet is 100/45 = 2.2.

Here’s your first value bet!

If we apply the expected value formula
(Fair probability – Market probability) / Market probability, we immediately understand
that this match has a positive expected return:

EV = (45% - 27,7%) / 27,7% = 0,95

This means that for every euro I bet, I expect a positive return of 0,95€.

## Finding true probability

As you may have guessed, value betting essentially means properly calculating the true probability of a bet and its fair odds. You can do it in two ways:

- through
**technical analysis**(analysis of movements and comparison of average prices), based on the wisdom of the crowd, and then assuming that the average price is close to the fair odds (as most competitors do) - through
**fundamental analysis**, i.e. analysing match data (shots, passes, training, goals, won/lost matches, etc.) and then weightening the characteristics of the team on the basis of its past performance against the other team skills (i.e. how Mercurius works).

At Mercurius, we chose the second way because it is the only scientific method that can calculate sports events true probability. Thanks to AI algorithms and a great quantity of data, Mercurius can analyse and quantify past performances, taking into account won and lost games, shots, home / away matches, goals scored, etc.

Mercurius can evaluate the fitness of a team and therefore the real probability that it has to win.

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