If you keep placing bets on outcomes of events, just because you fancy teams/players to win (Gut Instinct), without considering the odds fully then you will likely be losing money in the long run. Value betting involves independently considering if the odds offered are better than the true probability of the outcome happening, and only placing bets if that is the case. Let’s start our Why is Value Betting superior to using Gut Instinct? article off with an example:
Let’s say you are considering placing a bet in an event in which there are two outcomes only, e.g. the final of a competition where either team/player A wins, or team/player B wins (no draws possible). You need to calculate the true probabilities of the outcomes. This requires taking into account a lot of factors (prior results, injuries, officials, form etc. – variables will depend on what event you are betting on), and coming up with a statistical model (which may require, amongst other things weighting the factors).
Let’s say you calculate A wins two-thirds of the time, and B wins one-third of the time:
Two-thirds of the time is the same as odds of 1/2*, i.e. for every 1 time they don’t win, they will win 2 times.
One-third of times is the same as odds of 2/1*, i.e. for every 2 times they don’t win, they will win 1 time.
* UK Bookmakers usually quote odds in this Fractional form (as odds against an outcome happening).
Let’s say you go to your favourite bookmaker, and you find the following odds offered (this is a made up example):
1/4 on A to win
12/5 on B to win
As you understand this Why is Value Betting superior to using Gut Instinct? article, if you are betting for value:
You must NOT bet on A, as 1/4 are worse odds than 1/2
You should bet on B, as 12/5 are better odds than 2/1
The reason you may find better than needed odds on a particular outcome, is bookmaker’s odds can vary depending on a number of factors. Perhaps a bookmaker wants to attract more money to an outcome (so they can offset potential liabilities, on bets taken on other outcomes). For example, if England are playing in the World Cup, you may find their price to win the tournament (at UK bookmakers) are well lower than statistical calculations of their true probabilities would warrant (as lots of home fans are backing them only due to their support for the team, or gut instinct). This could mean prices for other teams are higher. Or, perhaps a bookmaker is doing a promotion (such as enhanced odds) on one (or more) of the outcomes in an event.
To summarise our Why is Value Betting superior to using Gut Instinct? article, finding value means independently calculating the probabilities of an outcome in a market (or even better all the outcomes in a market), and converting this to odds you will require. Then check the odds of the outcomes, versus the odds offered at your favourite bookmaker. If the odds offered on an outcome are better than what you require, then placing a bet will mean you win in the long term – this is provided your independent statistical models were accurate (which in reality would be difficult to do anywhere near 100% correctly). Of course, even if your models were 100% correct, your bet will still lose a certain % of the time (as for example if one-third of the time a team will win according to your probability calculations, and that’s the bet you place, two-thirds of of the time you will lose). However, with good bankroll management where you place multiple bets on different things (you only place a small % of your total available funds, on any one bet) if you keep placing bets that offer genuine value, you have a decent chance of winning money in the long run. Compare this to just betting on gut instinct, which virtually guarantees you to be a long term loser, as bookmakers build in a profit margin into their odds.