Becoming a successful bettor requires not only a deep understanding of odds calculation but, it is also necessary to understand how the market works and especially how the bookmakers operate.
Of course, bookmakers are in the business of setting odds and determining prices which are offered for certain betting events.
Photo: Zadorozhnyi Viktor (Shutterstock)
When viewing odds in betting exchanges such as Betfair, Betdaq, Smarkets, or WBX, you should understand that it is neither the exchange platform or the traders using them who set the odds.
The fact is that the bookmakers are used as the market guide for traders on the betting exchanges, and it is the bookies who compile and publish their odds weeks in advance of the events in question (sometimes even months), and certainly well before the exchanges even open their markets for trading.
If you have ever calculated odds you will have noticed that the bookmakers’ offers often do not represent the ‘true’ picture, in other words, the ‘true’ mathematically calculated values (the statistically expected values).
Only occasionally (probably in less than half of all cases) are odds close to the statistical expectations of the betting event. However, in the vast majority of games, odds are either considerably higher than mathematically expected or far lower…
Why Is This So?
You have to appreciate that bookmakers do not really intend to predict an outcome (correctly). If you enjoy statistical analysis, then take a little time to do a simple calculation for any league of your choice. Simply convert bookmaker odds into probabilities and compare them to the actual distribution of the results (historical data for 22 European leagues can be found at www.football-data.co.uk).
Bookmakers have been around for thousands of years in one form or another. Their main goal is of course to make a profit. They price their odds to ensure that sufficient action is taking place on both sides of a bet.
If a bookmaker’s betting odds are not aligned to public opinion then a disproportionately large amount of money will be placed on only one side of a bet. This would be a gamble for the bookmaker. However, bookmakers are not in the business of speculating on an outcome.
The role of bookmakers is, strictly speaking, rather the function of an intermediary, similar to a stockbroker. They take money from various people on various outcomes and after the game is finished they pay out the winners.
In return for this service, the bookies take a “fee” known as the overround.
Bookies are accountants who manipulate the odds so they can relieve you of your money!
Odds compilers know that many fans will blindly bet with their own team no matter what. In a derby match the home team is usually favourite 4/6-6/4 and the away side can be 2/1-3/1 and the draw will be 12/5. So essentially the fans of the opposing sides will cover each others bets. Add in all the people that put on 1st goalscorer correct score bets (even harder to get) and they would struggle to lose money.
Some bookies even have a team of specialist odds compilers that enable you to make almost any bet (my 4 year old son to play for England/Scotland 500/1), If you ask for odds of you climbing Everest they will look at your fitness, experience, percentage of summit attempts that succeed and give you odds.
If we have a situation where a bookmaker is deliberately moving his odds away from the norm in order to make the amount of money bet on each team lopsided. Then this particular bookmaker is not trying to balance their books but rather is having a bet themselves with the bookmakers’ margin still on their side.
Unfortunately, it is impossible to work out the actual true probability of a team winning; if we could, then we would be amazingly rich! But we can always attempt to approximate it.