Betting Fundamentals: Six steps to understanding betting basics

Build a solid foundation for your sports and horse racing betting

Betting Fundamentals

Understanding chance, probability and odds
Understanding how bookmakers set odds
Converting Odds
Calculating and understanding implied probability
Understanding value
Identifying value

Understanding chance, probability and odds

Understanding odds requires a basic level of mathematics knowledge. In any sport or horse race there is a likelihood of any particular event happening. For instance, in any horse race your chances of winning is simply dividing 100 by the number of runners. 

Let’s take a look at a race with 8 horses. 100 divided by 8 is 12.5, which represents a 12.5% chance or probability of your horse winning the race. 

Now let’s take a look at a game of football in the popular win/draw/win market. There are three possible outcomes, a home win, draw, and away win. 100 divided by 3 is 33.33, representing a 33% chance or probability of one of those possibilities occurring.

Now we have an understanding of chance and probability we need to talk about odds. The odds on any betting market are usually set by the bookmaker to attract betting on either side of the odds, in addition to their own calculations of the probabilities of either outcome occurring. The bookmakers’ intentions are always to attract as many bets as possible.

The next step is knowing how to convert odds into probabilities, or implied probabilities. Doing this is essential for understanding value, one of the most important aspects in sports betting. In order to be successful in sports betting you need to look for value, but how do you find it?

Understanding how bookmakers set odds

I mentioned that odds are usually set by bookmakers to attract betting on either side, in addition to their own calculations of the probabilities of each outcome occurring. In order to attract as many bets as possible, bookmakers will often set odds they expect the general public will bet on, moving the price or a line to make it equally appealing to backers of both sides. 

Bookmakers are primarily concerned with creating as much action as possible, therefore the odds and lines often inaccurately reflect the real probability of a particular outcome. Bookmakers are at a slight disadvantage in this regard which comes back to the concept of value. 

Sharp gamblers will often spot value when they anticipate bookmakers and the general public gets it wrong. You can find frequent examples of this happening when certain events attract greater interest than normal, such as England competing in various sports, Cup finals and major horse racing events such as the Melbourne Cup.

Converting Odds

Depending on which part of the world you live in or which bookmakers you use, there are three main ways odds are represented which can be quite confusing. Most online bookmakers will allow you to choose your preferred option, but it’s useful into understand the three kinds of odds you are likely to come across:

  • Decimal odds: represented as 1.40 or 2.70 etc.
  • Fractional odds: represented as 3/2 or 11/4 etc.
  • Moneyline odds: represented as -120 or +160 etc.

There are mathematical formulas you can use to convert these types of odds, but one of the easiest ways is to use this odds conversion chart which includes implied probability:

Implied Probability %Decimal OddsFractional Odds American Odds

Calculating and understanding implied probability

In this example we will use decimal odds to calculate the implied probability of a particular bet occurring. Let’s use an example where the odds on Chelsea beating Arsenal is set at 1.45. 

The formula for converting the odds to the implied probability in this situation is as follows:
Implied probability = (1 / 1.45) x 100 to get a percentage value. 1 / 1.45 = 0.69. 0.69 x 100 = 69%.

The odds of 1.45 therefore represents an implied probability percentage of 69% for Chelsea to beat Arsenal. It’s worth remembering at this point what we established earlier, that being any game of football has three possible outcomes in the win/draw/win market, representing a 33% chance for each outcome.

Herein lies the dilemma. What factors and formulas are being used by the bookmakers to decide that Chelsea have a 69% chance of beating Arsenal, when they actually have a 33% chance before a ball is kicked?

To give yourself the best chance of being successful in sports betting over the long term, you need to assess your own probability of an outcome occurring. If the implied probability suggested by the odds are less than your own, that represents value. Value is what you should be thinking about and looking for in every bet you make.

If the implied probability is less than your own assessed probability of a particular outcome occurring, that outcome represents a value betting opportunity.

Understanding value

Understanding value is the most critical aspect in sports betting. Staying with the example of Chelsea at odds of 1.45 to beat Arsenal, do those odds offer any value? Is there more or less than an implied probability of 69% for Chelsea to win? 

Being able to find value means spotting odds that are too high and capitalising on those opportunities. Alternatively, if the odds are too low there is always an opportunity to simply sit out that particular game.

Many successful bettors can recognise value in a particular market by experience, research or statistical models to assess the probability of an outcome. Being successful in sports betting requires understanding the difference between the chances of an outcome occurring compared to the odds on offer. This is value.

If you ever get into a situation where you think a team is definitely going to win or 100% certainties, you are not thinking about sports betting the right way. What you need to be thinking about is if there is value in any particular bet and have reasons to support your decision. 

In order to be successful in sports betting you need to outperform a large majority of the betting public, known as squares. Thankfully a large majority of the betting public (squares) don’t understand or practice the concept of value, creating opportunities for the minority of gamblers who do, known as sharps.

Identifying value

Identifying value can be done in a number of ways. Finding undervalued teams or betting markets can be compared to the stock market, where investors will find a company that is not widely known and on the way to being successful. A sporting team can be viewed the same way.   

Some teams fly under the radar because they don’t contain any superstar players or they play in a relatively unknown competition, such as Red Bull Salzburg in Austrian football. Some teams are continually overvalued because the public overestimates their ability and chances of success. The trick is to find these teams and exploit them before the general public catch up.

As mentioned above, certain events attract greater interest than normal and in these situations finding value can often be found. When England play certain events, bookmakers expect a large proportion of bets to be placed on England, therefore they have to adjust their odds to offset the chance of England winning to limit their liability.

Value can often be found in these situations, such as backing against England in the 2016 European Championships where they failed to beat Russia and Slovakia before being eliminated by Iceland. 

Identifying value isn’t easy and takes plenty of practice and understanding over a period of time. Once you know how to find value however, one thing is for sure, your chances of success over a long period of time will be significantly increased.
Matthew Marshall 11 May 2018

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