How does value occur?
Value occurs when you’ve got the upper hand on the bookmakers or the markets. Trademate provides you with what we call an edge percentage, which is an estimate on how much you will profit off that bet. If you place $100 on a 5% edge, you can expect to net profit $100 * 5% = $5. There are mainly two reasons valuebets occurs – and to understand them, we need to cover how the bookmakers operate.
All bookmakers and exchanges have a margin – that’s ultimately how they make money. Their margin may vary from as low as 3% to as high as 20%. Imagine a pure coin flip where you can bet on heads or tails. The odds should be 2 on each side, which means 50% probability of hitting one of the sides. For bookmakers to make money, they put their odds at 1.8 on both sides, skimming 10% off whatever the winning bet is.
The best and sharpest bookmakers in the world are purely market driven, which means that when enough money are put on one of the sides, that odds will decrease while the other one increases. This means the odds are ultimately decided by liquidity in the market. When the amount of money going through is high enough – the odds are as close to perfect as it will be. By looking at the odds of these high liquidity markets, one can acquire the knowledge of hundreds of thousands of people. Not many bookmakers can pull this off, because they don’t have a large enough customer base makings things too uncertain. The ones that can are mostly placed in Asia.
Value occurs when any kind of new information that impacts the game is acquired. A very good example is the FA cup game between Chelsea vs Manchester City on February 21st. A couple of hours before the game, the best odds you could get on Chelsea to win was around 1.75-1.8. Then, exactly 1 hour before the game the lineups went public – and it turned out that Manchester City brought five teenage full debutants in their lineup.
As seen in the picture, that information triggered a huge change in the market. All the high liquidity markets dropped from 1.75-1.8 to 1.35-1.45 in less than 10 minutes. However – a lot of the European bookmakers didn’t react nearly quickly enough. Some bookmakers spent more than 30 minutes changing their odds. That means you could now get Chelsea to win at 1.7-1.8 when everyone else agreed they should have no more than 1.35-1.45. This turned out as an edge higher than 15%.
Why you should stop punting, listening to tipsters and start looking for value
For every bet that is placed there will be a winner and a looser, plus the bookmaker always takes their cut. In order to be a winning player you need to not only be better than the players you are betting against, but you also need to clear the margin set by the bookie. Now, when a bookmaker sets their opening odds for a game, they are calculated based on careful statistical analysis of the team’s past performance, factoring in relevant information such as injuries. Do you really believe that your gut feeling is better than a team of professional analysts who does this for a living?
Next, the odds will be moved based on bets being placed by the market. This could be a betting syndicate who has their own models, that disagree with the odds put down by the bookmakers. One of the most successful betting syndicates in the world is run by Tony Bloom, the owner of Brighton Football Club, which might make it to the Premier League next year. Starlizard employs about 400 people working to beat the bookmakers’ odds. So if you are trying to pick winners, this is who you are competing against. This is also who the tipster on Twitter and at the pub is competing against. Pinnacle has written a couple of good articles on tipsters. How good are they really? And how to evaluate them? The point being that 99.9% of tipsters are either hustlers, liars or just naive judges of their own ability to pick winners.
But that tipster is such a nice bloke who is giving me great advice!
Know that “tipsters” who are profitable would never give away their advice cheaply or for free. Most tipster make money from affiliate deals with bookmakers where they get money if you use their links to sign up to the bookmaker site or by getting a percentage of losses made by bettors. If a tipster has an actual edge or inside information they will act upon this themselves. Only once they have taken a position in the game will they be willing to give up this information. The result being that they get better odds than you. For instance if a tipster recommends Troy at home versus South Florida in the NCAA at 1.75. They could front-run it by taking an earlier position at 1.80. Once people start following their advice and the market drops to let’s say 1.65 they can take a bet on the other side to make a sure bet. Most tipster also don’t want to give away their track record and for the once that do, there is no guarantee that they have not simply deleted some of the bets they have lost. Or that they only show you the 1 out of 10 years that they have been profitable, this is called survivorship bias. Again Pinnacle has written a good article on how to spot Tipster records that are too good to be true. So stop trying to pick winners and start looking for value.
How can you find value in sports betting markets?
To find extremely good valuebets as was the case in the Chelsea vs Manchester City game does not happen every day. Also, the Tony Bloom’s of this world will not bet on the European aka soft bookmakers, because their betting limits are too low. Thus there exists a lot of valuebets (1-5%) on the soft bookmakers when they offer higher odds than the sharp bookmakers even when the margins are accounted for. In order to determine whether a bet has value, an edge or in other words is +EV (Expected Value) I advocate the use of an objective benchmark, Pinnacle’s vig free closing line. Why the closing line is so important has been covered in this article. According to Pinnacle themselves, beating their closing line is a strong indicator of long term profits, because when the game kicks-off the market has reached an equilibrium based on all of the information possessed by the market participants. Basically money equals information and based on all of the information that is out there, the closing line is what the market believes to be the most accurate odds. So no matter which strategy you decide to use to find value, you should still measure your results against the closing line to separate skill vs luck. As a bettor you can try to look for value yourself or you can use a software that does so for you.
By Jonas Gjelstad