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.
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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.