How the Odds work
In today’s article I will explain how bookmakers determine the odds, what is their margin, how to calculate the probability based on the odds and vice versa, calculators that you can use for all these calculations, and everything else about the odds that we see every time, when we open a bookmaker.
How the odds work
The word “odds” literally means probability. Bookmakers provide odds that reflect the probability of an event happening. European bookmakers mainly use decimal odds to represent the probability because they are more convenient.
The probability is a scale starting from 0 (for an event that has no chance of happening) to 1 (an event that is sure to happen).
The probability formula sounds like this: Desired result / All possible results.
In the coin toss example, a coin falling somewhere is an event that is sure to happen, i.e. 1. And to calculate the probability of Heads falling, we divide one head of the coin, Heads, i.e. 1, by the possible results that are 2 (Heads and Tails) and 0.5 is obtained. In general, it is more convenient for people to work with percentages, so we multiply 0.5 x 100 and get a 50% chance that this event will occur.
How to calculate the odds
Having explained how to calculate the probability yourself, it is time to show how to convert this probability into coefficients.
Divide 1 by the probability of our chosen result. In the example above, we have Heads probability of 0.5, and when we divide 1 by 0.5, we get 2.00. This is the real odds for Heads event to happen.
Conversely, when we divide 1 by the coefficient of 2.00, we get the probability of the event 0.5, multiplied by 100 gives us a 50% chance.
How to calculate the bookmaker’s margin
Let’s look at the odds of a random match from the bookmaker Bet365.
We are watching the odds of the upcoming Champions League final between the teams of Man City and Chelsea.
Bookmakers estimate the victory for Man City at odds of 2.00. Divide 1 by 2.00 and we get 0.50, which we multiply by 100 to get a 50% chance of Man City winning.
For a Draw, the odds are 3.40 (1 / 3.4), which after applying the formula gives a 29.4% chance.
Chelsea’s victory is estimated at 26.3% probability.
The interesting thing here is that by adding these percentages we get 105.7%, not 100%. This 5.7% above is the bookmaker’s margin. This is the commission he collects from everyone who bets on any of these events.
Once you know what the bookmaker’s margin is, we can go back to the odds and see, for example, for the victory of Man City, what the real one is, that is, without the bookmaker’s margin. For this case, we multiply the coefficient 2.00 * 5.7% (margin) and we get a margin of this coefficient, which is 0.114. We collect it with the one provided by the bookmaker and we see that in fact, the real odds are 2.12, which is a 47.3% chance.
This is essential information for the value seeker professional gambler as it highlights the true price at which he is betting.
Betting calculators
Fortunately, friends, instead of doing all these calculations yourself, we have created calculators that will make this process easier for you.
On the bg version there are currently 3 calculators on the page, the first is for the bookmaker’s margin, the second is for converting odds into probability and the third is for converting probabilities into percentages.
What odds to bet on
Here, for example, after we convert the odds of CSKA-Sofia to win against Ludogorets, which is (2.30) 44% chance presented by bet365, but we know key information that tells us that the chance of CSKA to win is more than (2.00) 50 %, we can play this bet knowing that we have an advantage over the bookmaker expressed in 0.30 hundredths.
We will find out if we were really right just before the start of the match by checking the odds in Pinnacle, which is the most accurate bookmaker. If the odds there are 2.00 just before the start, then we have defeated the bookmaker. If we do it constantly, we will certainly win in the long run.
Which bookmaker has the lowest odds margin
Having told you how the margins work, you are probably wondering who is the bookmaker with the lowest margin to play there. The truth is that the bookmaker with the best margins is different for each sport, but one of them in sports is Pinnacle. That is why we so often recommend it. One of you said that we advertise to him and make it look like that, but we gain nothing from it, we just share facts with those of you who want to become professionals. On average, European bookmakers have a margin of about 6-8%, and in Pinnacle it is about 2-3%. Information about more bookmakers, sorted by margins, can be found here.
Another time we will talk about betting exchanges, where there is a commission of only 2% profit because the odds are determined by the players and not by the exchange itself, but this is a long topic.
How to calculate your profit based on the odds
Most of you probably know how to win, namely by multiplying your bet x the odds of the event you get your payout and subtract your bet from it to get the net profit from the bet made.
This concludes today’s article, hoping you understand how the odds work. If there is something unclear you can ask us in the chat.
If you want to work with us and bet on value bets, giving an advantage to bookmakers consistently, thus making a profit in the long run, you can take a look at our services.
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