How do Bookmakers Tick? How & Why do they Set Their Odds as they do?

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.

Cartoon: Group looking at a whiteboard with very strange word on it / Karikatur: Gruppe vor einem Whiteboard mit einem sehr seltsamem WortIf I had to use just one word to describe how bookmakers think…

Image: Cartoonresource (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.

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.

The bookmakers’ priority is balancing their books

The closer to the kick-off of a game, the more ‘fluid’ the odds become, as salient information such as team news becomes public knowledge, and this then has a knock-on effect with bettors’ opinions being confirmed or changed on the outcome of the match in question. Thus, the odds tend to change more as the start of the match gets nearer and nearer and more money changes hands.

Always remember

  1. Bookmakers set odds based on a mixture of statistical probabilities and public opinion.
  2. Bookmakers do not speculate (gamble). Their priority is balancing the books.

learn to think like a bookmaker!
deciphering bookmaker mathematics

Last Update: 10 February 2017

Categories:Bookmakers Odds Calculation

20 Responses to “How do Bookmakers Tick? How & Why do they Set Their Odds as they do?”

  1. sarkec
    22 September 2016 at 8:17 am #

    Hello Soccerwidow!

    I would like to ask that if Bayern Munich playing at home, it’s odds is 1.2, what are professional bettors do before kickof?
    They are trying the back high, and lay low or just simply they are waiting the odds to go out of fair odds range and simply lay them? If they are doing this, they shouls have big patient..


    • Soccerwidow
      28 September 2016 at 9:27 am #

      Hi sarkec, if you are referring to in-play betting then this question doesn’t have a simple answer because it really depends in which direction the odds are expected to move.

      However, if you are into fixed odds betting, and say you have calculated a ‘fair odds’ range between 1.18 and 1.22, and find odds for Bayern Munich of 1.2, then either lay Bayern at 1.15 and hope that somebody will match them after kick off, or back them at 1.25 (or higher).

  2. audiendi
    13 May 2017 at 7:28 pm #

    Hey guys,

    Firstly, I’m really impressed by your site and your diligent replies.

    I’m wondering is it at all common to find overpriced short odds in the 1 x 2 market? Or is it only common for there to be ‘value’ with long odds?

    I’m a beginner. But I want to start placing bets, the thing is I’m a bit scared by the prospect of betting with emotion or looking for upsets and then getting addicted to it. So I’m thinking of using a maths-based system and a more conservative low odds strategy with risk spread across heaps of such, single bets.

    May I also ask, is your value calculator similar to the type that betting agencies use to calculate their estimations of probability (before adjusting their odds for the reasons you outlined)?

  3. Right Winger
    13 May 2017 at 10:27 pm #

    Hello Audiendi,

    You can find value in any size of odds – it is not just limited to the longer underdog (or draw) odds. But beware, perennial betting on favourites is a sure fire way to long term bankruptcy.

    The Value & Probability Calculator is certainly a good start for a beginner. It will enable you to analyse individual matches and find value in a large range of bet types.

    Yes, it is a valid method for calculating probabilities, which you must do in order to find value.

    The HDAFU Tables are also a sound method of betting unemotionally, without needing to know anything about the matches in question. It’s all based on maths and numbers.

    The strongest advice we give to beginners is to master things on paper before committing money on a single bet. If you feel you want to rush in and start betting straight away, then you are not mentally ready to make money in the long run.

    Consider also our Odds Calculation Course, which will teach you how to read and understand statistics, and use them for future forecasting. It’s an unique insight into how bookmakers set odds, and if you want to play them at their own game, you will need to know how they operate.

    Good luck!

    • audiendi
      15 May 2017 at 9:43 am #

      Right Winger,

      Thank you!

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