How Odds Represent Probability Of Outcome

How Odds Represent Probability Of Outcome

August 14, 2016

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If you’re one of our newer and inexperienced members of the ever-growing Betting Gods army of punters, then this is a simple explanation of betting odds and how odds represent probability of an outcome or event, and how our tipsters try and gain a value angle when they look at Bookmaker’s Odds.

Odds represent probability

A Simple Explanation Of Odds And Probability

The easiest way to explain odds and probability is to use a couple of basic examples, which are the toss of a coin and the roll of a dice.

When you toss a normal two-sided coin, there are only two possible outcomes – it can either land on heads or it can land on tails. Each has an equal chance of happening on any toss, and that chance is half of 100% = 50%. Therefore, if you were to bet on either outcome, you would expect the odds of success to be even-money, or 2.0 if you were betting in decimals.

When you roll a six-sided dice, there are six possible outcomes, as it can either land on one, two, three, four, five or six. Again, each has an equal chance of happening on any roll, and the chance of that happening is 16.66%. Therefore, if you were to bet on any outcome, you would expect the odds of success to be 5/1, or 6.0 if you were betting in decimals.

Therefore, if you have a 10-runner horse race in which all horses or of equal ability, the chance of any horse winning is 10% or 9/1, however it is very rare that all horses in a race are of equal ability – and that is where the judgement of a good tipster is essential in finding value in the market.

Understanding Bookmakers Margins

If bookies offered betting on the toss of a coin then, as discussed above, both tails and heads should be priced-up at even-money as they both represent 50% of the market. 50% + 50% = a 100% Book.

However, as bookies are in the betting game to make a profit, they build in a percentage for themselves. This means if they laid each possible selection to the same amount – they would make a profit regardless of the result. Therefore, if they were to price-up a coin-toss, they would likely price-up each possibility at 10/11, equivalent to 55%. Therefore, 55% + 55% = 110%.

In regard to horse racing, Bookies often price-up a race at 100% + 1.5% for every runner, so a 10-runner race would be priced-up at 115%. This not only allows the bookies their percentage, but also allows for fluctuations in the market throughout the day.

Finding The Value

Good tipsters will price a race up at 100%, and they’ll do this by considering many factors such as a horse’s rating, ground, distance and various other factors.

Then will then compare their odds against those of the bookmakers. In some cases, it may be that both parties have similar notions about the chances of each horse – in which case most tipsters will decide that this market offers no value bets.

However, in other cases, the opinions of tipsters and bookies can vary greatly – and it is in these races that the shrewd tipster, who understands that finding value is the key to long-term profits, will have a bet whether, for example, it is a 6/4 chance he thinks should be even-money, or a 33/1 shot he thinks should be 20/1.

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