Value betting is, without a doubt, one of the biggest betting crazes of today’s time. Questions like “were you able to find any value here” are, nowadays, recurrent within the industry. Admittingly, we also have mentioned value betting before, namely here and here. Value betting is not a new term. However, today there seems to be a lot of noise around it. Some enlightenment around the issue is in need. Let’s dive in, shall we?
In its essence, value betting is taking advantage of overpriced odds. Such overpricing represents a situation in which the bookmaker offers you odds higher than the real odds. In other words, the probability of a certain event happening is actually higher than that listed by the bookie. This means that there is an advantage for the bettor to make some money, in the long run.
For the sake of exemplification, let’s consider a coin toss. The odds of getting heads are even. But if we told you that the odds of heads coming up were 2:1, you would be flipping coins all day, every day. For every 20 games played with €1 bets, if heads came up 10 times, you would win €20 and lose €10. Not bad at all, uh?
A systematic approach to sports betting
In some other articles around the web, bloggers have felt the need to differentiate between arbitrage betting and value betting. If you want to know more about the two distinct strategies, please check out this post. All and all, the main difference between value betting and arbitrage is that the former exposes the bettor to more risk, thus leaving the opportunity for bigger returns as well.
In fact, discussing value betting implies mentioning volatility. Value betting is a riskier strategy. Essentially, the outcome is a lot more uncertain. With arbing and matched betting, the bettor is shielded against a potentially bad outcome, unless he is unable to perfectly place the strategy: houses can limit you, the odds might float, etc. But, in value betting, that is not the case. Hence, why the volatility increases. With value betting, luck does come in to play. On the short term, you can be lucky and make a good profit, but you can also be unlucky and have a few days down. After all, you are chasing mispriced odds based on your own prediction models. It could so happen that both yours and the bookie’s guesses are wrong. Or simply slightly more incorrect that the needed for you to win.
Chasing value bets is risky, so don’t expect to cash in some profits all the time. However, over the long run, losing value bets will be compensated by the winning ones. This will definitely provide you with the returns you need to be profitable over the long run.
Value betting: Fundamental & Technical
A lot of people like to distinguish between two types of value betting. For this post, we have decided to follow a similar approach.
Fundamental value betting usually refers to the traditional way of making money as a sports betting expert. It all boils down to going pro on a particular sport, creating your own odds and then betting when you think the bookie has got them wrong. Conversely, technical value betting has been deemed one of the biggest sports betting trends of 2019. It is using mathematical logic to understand what the market thinks and betting with bookmakers that have a different stance. As you will see later on, in terms of capital required, risk tolerance and skill involved, fundamental and technical value betting are very different.
Fundamental value betting: old but gold
As we mentioned before, many describe fundamental value betting as the more conventional way of making money as a sports bettor. To turn in some profits through fundamental value betting, you actually have to become a sports betting expert. You not only need to know a lot about a given sport but also to create your own odds. And usually, this is the part of the explanation that confuses people… Let’s take it slowly.
Breaking down fundamental value betting
Creating your own odds is deriving, from a statistical model you have developed, the probability at which a specific event will occur. In that sense, you can almost think of yourself as some sort of a bookie. You are, after all, in possession of a model that tells you the likelihood of races being won, and of goals being scored. Only thing is that you will not be taking bets from bettors, but rather from other bookies. And only in the cases in which your model tells you that the odds found in the market are higher than the ones it gave you.
Now, this sounds a lot easier than it is. You have to invest a lot of time, money and effort in order to profit from fundamental value betting. These sorts of statistical models are the result of years and years of placing bets as a regular bettor. This is a move that, in itself, entails having analysed tons of sports data over the course of time.
Experience is the ultimate foundation for becoming a sports betting expert through value betting. And those experienced experts are the ones you would, normally, find on the racing fields in horse racing. Their strategies rely on a lot of secrets that they are not fond of sharing with anyone. Commonly, it’s precisely in such secrecy that the key to long-term profits rests. Therefore, why would they share it with anyone? It is precisely those little secrets that allow them to play for odds that are unavailable to everyone else, be them bettors or bookies.
Technical Value Betting: AI and Big Data
As Big Data and AI start to make their way into sports betting, it is only logical that such technology will be used by some to take advantage of the inefficiencies of the market. Data scientists can now use mathematical logic, statistical models and market data to predict market sentiment for a certain event and bet with bookmakers that have a different stance. This is what a lot of people are now referring to as technical value betting.
Fair odds and implied probability
Comprehending technical value betting implies knowing the difference between fair odds and implied probability. When a bookmaker tells you that Team A wins @1.77, it is not telling you that those are the real odds for Team A winning. In fact, 1.77 has been calculated according to the bookie’s business model. Most bookies would have adjusted the price with their own spread to protect against eventual losses. This is the implied probability of an outcome and it is higher than the probability the bookies expect to be the real one. Thus, the bookie reduces the payout (via cutting odds) paid on an winning bet in that outcome. The fair odds is the theoretical odds that represents the real probability of the team winning.
Having said that, technical value betting is using AI and Big Data to test the wisdom of the crowd (from which you could somewhat infer the fair odds) and facing it against the implied probability of the house. When the AI finds one particular gap between implied probability and fair odds that is higher than a specific pre-defined interval, it places a bet. Let’s say that a house is paying 2.00 for a given event. The implied probability is 50% (1/2.00). However, the house has put some margin in it – what is called the “vigor” or “vigorish”. They are paying 2.00 for something that should be priced at 2.10. This event will, then, only happen ~47.5% of times. After 1,000 bets of €1, you would be down (on average) €50 instead of breaking even.
Making a decision
A bet in here would only be placed if the model indicates that the probability of the event is higher than the implied probability of the house (50%). It is not enough to be above the “real” probability given by the house (47.5%). In the latter case, you would recover part of the vigorish, but you would still end up losing. If your model indicates a probability of 52% for that event, then you should take advantage of the 2.00 odds. Assuming your model is correct, in every 1,000 €1 bets, you’ll profit €40 in this scenario (+4%). This is given by the ratio of the odds and the fair odds. An event that happens 52% of the time should have odds of 1.923 (1/0.52) in equilibrium, and 2.00/1.923=1.04.
Fundamental vs Technical
As we have said before, fundamental and technical value betting are two very distinctive betting strategies in terms of the required level of skill, capital and risk tolerance.
On the one hand, fundamental value betting seems to us to be more suitable for players with a bucket load of experience and a sufficiently large bank account. This is due to fundamental value betting being slightly riskier, as it entails a willingness to experiment (which, in sports betting, is a close synonym to loosing). On the other hand, technical value betting is more suitable for bettors with less capital and who are more risk-averse. Nevertheless, it implies a data science and mathematical background that most people lack. And the acquisition of such knowledge is, in itself, a quite substantial investment.
In Betmarkets, we offer experts that employ both strategies. Choosing one over the other is a matter of fit, considering your available funds, your past experience in betting and your own risk tolerance. However, both strategies pair up with our business plan – profitability in the long run. Yes, there could potentially be some bad days (let me correct this, there WILL be negative days; and some terrible ones as well). But the good days will fairly compensate the negative ones. Value betting is riskier, but also more rewarding. Our experts know that, and their moves are calculated and premeditated. So, whenever you see that one of your experts had a bad day, don’t give up on him. That’s giving up on potential future profits.
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