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Wisdom of the crowd in betting

To be able to place value bets and make a profit, you need to understand how an odd is calculated. In this article, you will learn how the concept of ‘wisdom of the crowd’ affects the odds and makes them more efficient. How exactly do bookmakers reach the odds you see on their websites? How you can make a good profit from sports betting?

We will also learn you how to profit from bookmakers’ mistakes during this process.

The Process of Setting the Odds

It all starts with a good idea of the chances each team has at winning the match. At the bookmakers’ office, the traders are the ones who have to produce odds that are closely representing the actual chance of an outcome. They have to take into consideration many things, for example: the form of the teams, injury data, crowd influence, referee, et cetera.

Wisdom of the crowd and value betting

Probability distribution

If we are talking about two evenly matched teams that are playing on neutral grounds, the odds will look like this:

  • Team A wins: an odd of 2.75 (36.4% chance of happening)
  • The match ends in a draw valued at an odd of 3.60 (27.8% chance of happening)
  • Team B wins: an odd of 2.75 (36.4% chance of happening)

If you add up all the percentages for each of the outcomes, you get a result that is close to 100%. This is the real representation of chances.

Bookmakers’ profit margin

However, with such a representation, the bookmaker would break even over time. Because bookmakers have to make a living in the world of sports gambling, they have to skew the odds a bit to make the situation more favourable for them. So, the representation after the bookmaker’s adjustments might look like this:

  • Team A wins at an odd of 2.50 (40% chance of happening)
  • The match ends in a draw valued at an odd of 3.4 (29.4% chance of happening)
  • Team B wins at an odd of 2.50 (40% chances of happening)

If you add up the percentages again, you will get 109.4%, meaning that the bookmaker has a 9.4% profit margin. So, for every € 100 that is gambled on that specific betting market, the bookmaker makes € 9.40 profit.

The wisdom of the crowd in relation to the odds

Above, we’ve seen how a bookmaker decides on his opening lines. Now it’s time to check out what exactly happens between the moment the odds are published and the first whistle of the football match, also called the closing line.

Value betting and the closing line

In reality, the bookmaker’s intention is not to get the prices right so that he will benefit in case one team wins. The real challenge is to get the book balanced in such a way that the bookie doesn’t have to worry which of the teams wins; he wants to make a profit anyway. In order to achieve this, the bookmaker keeps a close eye on the bets that are being placed as soon as the lines have been opened.

Closing line: the most efficient point of the market

The perfect time for value betting is right after the odds are published. From then on, the odds will tend to reach a certain equilibrium due to the wisdom of the crowd. This state of equality between odds is achieved by careful interventions of the bookmaker, called ‘lengthening or shortening the odds’. If an odd is so attractive that many punters put their money on that outcome, the bookmaker will shorten that odd to make it less attractive. At the same time, he will add value for the opposition in order to balance the number of bets each outcome has.

In other words, based on the ‘wisdom of the crowd’ principle, bookmakers constantly adjust the chances of maintaining a balanced odd, thus avoiding exposure on one specific side. The odd offered just before the start of a match is called the closing line and reflects all statistics, news, wagering activities and market sentiment. Therefore, this is the most efficient point of the market and reflects the most accurate representation of the underlying probability.

Pinnacle Sports: the most efficient bookmaker in the market

Selections for betting on football

The situation in which a bookmaker gets as close as possible to balance their books is what happens when he doesn’t take a certain position regarding an event. Pinnacle is a bookmaker that rarely takes positions on games. Instead, Pinnacle relies on highly professional odds management algorithms and allows the market to make its own decisions, as explained above.

The closing line of Pinnacle is seen as the most efficient point in the market. Applying small margins and adopting a very relaxed attitude almost similar to one of a betting exchange, Pinnacle enjoys an extremely high volume of punters. This means that their market is much wiser compared to other bookmakers. At the same time, it is much more efficient and a lot harder to beat.

Identify mistakes made by other bookmakers

Pinnacle’s increased market wisdom can be used to estimate real chances. As a matter of fact, it’s so good that we can use it to identify mistakes made by other bookmakers and locate the value betting opportunities that we’re all looking for.

Wisdom of the crowd related to odds

How to find these value bets?

With the help of Pinnacle’s odds you can place value bets at other bookmakers that do not enjoy the same volume of betting and are still very close to their opening lines. This approach allows you to exploit the mistakes of other bookmakers and increase your winning chances considerably.

As you can see: we at Transparent Bets are here to help you grow your bankroll with sports betting!

See also:

Explaining fixed matches

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