How luck influences your short term betting
The relationship between the bookmaker and the player (bettor) is based on the odds by the bookmaker and the bettor’s opinion about the accuracy of the odds.
The simplest example is a fair coin toss. The probability of the head or tail showing is equal, which is 0.5. When converted into decimal odds, the probability would be 2.
Certainly, the bookmaker intends to make profit and will therefore price the odds less than 2 to ensure that the bookmaker receives profit in the long run for any bet made. A price of 1.87 for both outcomes has an implied probability of 0.535 for each of the two possible outcomes.
The margin for such a simple market is derived from the sum of implied probabilities. In the case of the example given above, the margin would be 1.07 or expressed usually as 7%.
The higher the margin, the easier for the bookmaker to ensure that his bets are not higher than the true probability of an event occurring, which would allow the bettor the opportunity to earn in the long term.
Thus, bookmakers, who consistently apply low margins to their markets, such as Pinnacle Sports, are more attractive to bettors because they offer more betting value in sporting markets, where, in contrast to coin toss, the odds depend on a set of factors.
If betting in a game with a lower margin book is the first step to the path to profitable betting, then a profitable yield is the most visible sign that your bets have passed the value test.
However, bettors should assess whether a run of bets will be profitable or non-profitable, based on the implied true probabilities.
If we return to the artificial example of coin toss, where we are sure of the true probability, we can calculate the probability of whether a large number of consecutive bets will be profitable or not.
The outcome of ten winning bets may alternate with ten consecutive losing bets. But it is more likely that the outcome of ten such trials will include both successful and unsuccessful bets, and moreover, it is very likely that they will be equally divided. In simulating the situation using a binomial calculator, this outcome has a probability of about 0.25.
The outcome of each toss is independent of the previous outcome and the bookmaker will use his margin to offer an unfavorable price to the player for each toss.
For example, if the odds for each coin toss is 1.87, i.e. a 7% margin, five successful throws from 10 bets would produce a return of 9.35 units, provided that 1 unit was placed for each bet. As a result, we’ll have a loss of 0.65 units from the ten bets.
How margin influences your profits
We can use this simple example to illustrate the importance of understanding how a bookmaker’s margin influences bets. If you place 1.95 odds for each event, and that margin is only 2.5% compared to the previous 7%, and although we still suffered losses from 5 winning bets out of 10, this los would be reduced from 0.65 to 0.25 units.
In order to make a profit from a series of bets with unfavorable odds, we will need six or more winning bets out of ten. Again, going back to simulation using an online calculator, we obtain a below 0.21 probability of correctly guessing precisely six sides of the coin in ten attempts, and this implies a yield of 1.22 units at 1.87 odds or 1.7 units at 1.95 odds.
Of course, seven wins and more than ten attempts will also bring us profit, and the cumulative probability of correctly guessing six and more sides of the coin is 0.38.
Thus, due to the way we’ve set up this artificial scenario, we see that each individual event in the bookmaker’s line is estimated as unprofitable odds for the bettor. Nevertheless, there is little chance of six or more winning bets happening, and the player would profit as a result.
Always keep records in order to differentiate between luck and skill
Real betting sequences will feature a variety of prices and betting amounts, but the key to a successful approach is identifying prices that may not fully reflect your personal estimation of the actual chances of a particular outcome.
Therefore, keeping a record of your estimation of the true probability of success, alongside the implied chances from the bookmaker’s odds, is a good habit to develop.
You can not only compare the two values, but also use a relatively simple spreadsheet based on the coin toss scenario to determine the part in which luck and skill may have played in your current betting results.
A very informed bettor will often think in probabilistic terms, not just for individual outcomes, but also in terms of profit or loss from the entire sequence of bets.
Source: Pinnacle Sports
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