How Bookmakers Set Odds
Lots of people that are betting on football underestimate the importance of the odds they’re getting. They understand the main concept of how much will they win with their wagers, but don’t go deep enough and it is one of the main reasons they are losing money in the long run with their football betting. This guide in or series of how to bet on football covers finding value in football bets.
- New Bookmaker Offers, Sign Up Offers, Enhanced Odds, New Customers Offers & Exisitng customers offers: Claim up to £0 bookmaker offers. Updated Dec/2020.
- How do betting odds work? We explain in full in our beginners guide to gambling odds, with helpful examples.
- Frequently asked questions by OddsPortal.com users.
You have to learn to look at the odds as possibilities and pick your bets based on a complex approach that includes a variety of factors. In order to do that, you need to learn how the bookmakers work first. That’s the purpose of this article – to show you the whole process behind football betting odds and give you some tips how to take advantage of the positive value that sometimes occurs.
Of course, the process is not exactly the same with each and every bookmaker out there, but the main principles remain similar.
Every bettor is looking for ways to beat the bookie. To become a consistently profitable bettor though, a deep understanding of odds calculation is only half of the story; the other half is knowing.
First Step: Data Analysis
It all starts with analyzing all the possible information out there. The sportsbooks have a bunch of odds compilers and traders who are getting paid to do that. They have the best possible tools and formulas as well which allows them to evaluate the probabilities for each game from a statistical point of view.
Previous results, recent shape, injuries and suspensions, pretty much every significant factor is included to reach the initial evaluation of each game. It’s safe to say that the bookmakers are really good at it, especially when it comes to the most popular football leagues such as the English Premier League, the Spanish La Liga, the German Bundesliga, the Italian Serie A, the Champions League. They attract so much money, that the operators don’t hesitate to invest lots of money and effort to be as close as perfect as possible.
Cash Projections
How Do Bookmakers Set Odds
After the probabilities of each outcome of the football match are determined, it’s time to get to the next step: changing the odds to include the cash projections. The sportsbooks have algorithms based on previous experience that help them predict with a decent success how much money will be placed on each outcome.
This is extremely important since they need to keep a certain balance on each football match. If the money isn’t spread in the correct proportions, they risk losing a fortune and depend on luck way too much. As you could expect, the sportsbooks don’t like losing and don’t like risks.
This is why including the cash flow projections helps them attract money to certain outcomes that usually would see fewer bets if the initial probabilities are the only factor behind the odds. The best examples are the home games of widely popular teams. Let’s take Barcelona or Real Madrid for example. Most people usually bet on them winning and this is one of the main reasons the odds are extremely low and almost never contain value.
The Margin/Juice
At this point, the bookmakers already have a precise idea what to expect from the game and they also know approximately how much money to expect. This allowed them to compile the odds for each market, but they still need to ensure they will be winning in the long run. If they give fair odds, they will be around the break-even point and we all know that’s not the case.
This is where the so-called margin or juice comes in. Simply put, the bookmakers gain an advantage by giving overall odds that are a bit lower that they should. If we take a look at a random two-way football betting market like Over/Under 2.5 goals, for example, we could see that placing proportionate wagers won’t bring your money back in full.
Let’s say both outcomes are with the same probability and there is a 50% chance for each. Fair odds would be 2.00 for both and if you bet 10$ on over and the same on under, you will get 20$ back, no matter what happens. In reality, the prices would probably be about 1.93 and the difference is the bookmaker’s margin.
The percentage varies in each operator and depends on lots of factors. Brick-and-mortar sportsbooks usually have a higher one since they pay bigger taxes, while it’s rather low online. The best bookies on the web have about 3-5% margin on most of their football markets.
Why Do the Odds Change?
The process is now finished and the bookmakers have the odds ready and launch them on their platform. But that’s not the end, as we’ve all seen the prices change before the match starts and the driving factors behind it are usually similar:
- Objective change in circumstances: this could be an injury, a suspension, any other change that might affect the performance of both times and influence the possible outcome of the game;
- Cash flows: the initial cash projections are accurate, but to an extent. Sometimes the expectations differ from reality and the bookmakers have to adjust.
Where Does Value Come from?
How Do Bookmakers Set Odds
We’ve explained how the system works and now it is time to take a look how could we take advantage of this knowledge. There are two main ways that value can occur:
Wrong Initial Evaluation
The bookmakers are sometimes wrong in their initial evaluation of the game. That happens rarely, but it happens nonetheless. Despite all of their data and tools available, the sportsbooks are not always perfect. Especially when it comes to minor leagues that don’t attract so many customers. Using all of their powers would mean lots of costs and this is where you can take advantage.
If you know a minor league really well and have some good sources of information, you could beat the bookies. The best examples are fixed games, earlier knowledge of injuries, connections in a certain club and so on.
There’s another way to beat the bookies, but it’s much harder. You have to be very good with numbers and find a way to process data better than them. To be honest, this one’s really hard and most people would fail. Unless you are a math magician, you’ll hardly succeed with such an approach.
Beat the Crowd
Since we know how important cash flow is and how it affects the odds, this is the other way to find value. In popular leagues, the money placed could sometimes skew the prices to a point where there is money to be made. When millions go in one direction, the bookies adjust and you could find some good betting options.
This is the much easier and much more efficient way to find bets with positive expectations. Most punters are not well-prepared and you can get the better of them in the long run.
Conclusion
As you can see, the whole process behind the odds is complicated and finding good bets is not easy. It requires a lot of effort, experience and a complex skill set. We encourage you to not limit yourself and try combining different approaches for the best results, especially when you’ve got a sign up bonus to use. Even the slightest edge might be the difference between a winner and a loser at the end of the day.
Today’s gambling industry has always been a subject to countless stereotypical myths and falsehoods. And some are far too damning to believe or even imagine that they are true. On the streets, it is a popular belief that bookies actually set the odds themselves.
Yet, that isn’t anywhere near the truth. No bookmaker has the right to set the odds. In fact, the contrary to this rife and downright damning allegation is true: gamblers are the ones who have the last say!
There’s no truth in the statement that the odds are decided by betting providers. Bettors all over the world decide the odds, and bookies are only left to make them available for betting on. How this happens is quite fascinating.
The fact that the entire world of bookmakers is huge and diversified doesn’t mean these players never sing a single song in unison. First, their unity stems from the technology they run and manage their odds on.
As for the odds and how they are generated, the onus goes back to the gambler. Odds essentially are a product of supply and demand from punters. Bookies apply the original equilibrium price ideology to set the market price.
Bookies use different strategies on their trades, but this doesn’t alter the truth about how gamers decide the odds. The only thing that brings the all-too-important checks and balances is simply how they employ different strategies to readjust the odds and establish a competitive edge.
What Role Do Odd Compilers Have?
After they’ve analyzed the market and decided how certain markets behave, bookmakers use their own teams of odds compilers. These cliques use their extreme knowledge and particular types of software to determine and publish the final odds.
Odd compilers ideally play a critical role in determining the odds to be staked on. And part of their skills is to ensure that they are as reasonable and beneficial to both parties as possible. Essentially, they consider four key aspects highlighted below:
- Their independent outlook
- Profit margin
- Prevailing betting habits
- Competitor’s odds and lines
Prices somehow arise from the “wisdom of the crowd.” But within the millions of gamblers are professionals with massive successes as well as those who only gamble for fun – recreational gamblers.
And so, after carefully analyzing a match based on the above factors, the compilers must still remain cognizant of the modern-day sports bettor’s price sensitivity. And the trick here is to offer the most competitive odds in the market.
Odd analyzers, thereafter, respond to the market by constantly adjusting the odds and lines. Basically, these individuals can’t do all the odd analysis, publish them online, and sit and watch. They have to keep adjusting them until the game is no longer available for betting.
How Bookmakers Calculate Odds and Set Prices
Now that they don’t set the odds, bookies must ensure that the odds convert margins into odds and balance the book so that whoever wins still guarantees them a profit. Basically, the underlying idea isn’t exclusive to the probabilities of an outcome alone.
And the secret is deep beneath how they calculate odds and set prices. They will set prices in a format that limits variance and still guarantee them a profit regardless of a game’s outcome. Calculations are a balance of their major profit-making endeavor and their need to appear the most competitive bookie.
It is a long and quite elaborate procedure, often left to their best odd compilers and odd calculation software. Essentially, lots of factors come into consideration, all tweaked to favor the gambling company more.
“The Brave Ones”
This refers to those bookies that often are the first to publish their odds. As much asthe odds are decided by betting providers, ‘the brave ones’ mostly prefer to publish first and attract more bettors.
Odds published earlier aren’t necessarily beneficial to either party. The brevity can easily hurt the betting company, particularly if the odds are unusually higher and can return little or no profits. It can alternatively eat away the stake of those who bet ahead of the final odds updated.
The only gamers who benefit from these early bets are those who take their time to analyze and detect any badly placed quotas worth risking on. Their focus mostly is on those markets that offer a greater chance of a windfall.
Remember, Bookies are in Business!
Betting providers know that they cannot decide the odds. But knowing that they can influence the numbers to favor their profit margins, they simply do so surreptitiously. And one simple way of doing so is by waiting until when the market is reasonably formed and bettors are eagerly waiting to bet.
They wait until when several bookmakers have offered their prices so that they use the existing odds to set theirs. And much as they will be seeking to look competitive and attract more wagers, these bookmakers will also be looking to manage their risk books and make a decent profit.
So, why do bookmakers rely on bettors to set the odds?
It is important to note that the reason why betting companies do not decide odds is that the betting habit and the general views are held by the bettors themselves. And the bookies are only there to benefit from it.
Punters naturally have a minimal chance to strike riches off gambling. And betting companies know that they are the eventual winners in the long run.
See, bookmakers cannot alter every market to give them a profit. But they ensure that they minimize risks of losing funds to clients and closing business, even in the most obvious of all circumstances.
Thankfully, professional gamblers and those that can win massive payouts per each betting round are few. Betting companies survive off the many recreational bettors who see no problem winning at least once in a while.
If you are a sports gambler or perhaps frequent an online betting companyamid the ongoing pandemic, it is better to understand that you form part of those who decide the odds. But you should also understand that the bookies use the same odds to win against you, even when you win!