It is every punter’s dream to beat the bookmakers and make sports betting a habit. However, things are not at all easy. In this article, you will learn how the concept ‘wisdom of the crowd’ affects the odds and makes them more efficient. To be able to place value bets and make a profit, you need to understand how an odd is calculated. How exactly do bookmakers reach the odds you see when you access their website? How you can make consistent proft from sports betting?
In this article, we aim to go through the entire process of bookmakers calculating the odds. We must warn you right from the start, it is no walk in the park. However, together we will go through all the steps to make this information accessible and easy to understand. Finally, we will learn you how to profit from bookmakers’ mistakes during this process.
The Process of Setting the Odds
In case you did not know why the sports betting websites are also called bookmakers, it is this exact process of setting up the odds that gave them the name. Many people in the industry refer to this process as ‘making the books’. In other words, pricing up the events and determining what odds to display for punters.
For the following examples, we will be using the most popular betting market: football. This is where the wisdom of the crowd effects can easily be observed.
Setting Up the Odds for the Football Betting Markets
Everything starts with getting a real representation of the chances each team has at winning the match. Inside a bookmaker, the traders are the ones who have to produce odds that are closely representing the actual chance of an occurrence. This means they have to take into consideration many factors. For example, the form of the teams, injury data, crowd influence, who is going to be the referee and a lot more factors.
If we are talking about a two evenly matched teams that are playing on neutral grounds, the odds will look similar to this:
- Team A wins – an odd of 2.75 ( the equivalent of a 36.36% chance of happening)
- The match ends in a draw valued at an odd of 3.60 ( 27.7% chance of happening)
- Team B wins – again, a 2.75 odd ( the same 36.6 chance of happening)
If you add all the percentages for each of the outcomes, you get a result that is extremely close to 100%. Also, this is the perfect illustration of how the process of setting an odd starts. This is the real representation of chances.
Bookmakers’ profit margin
However, with such a representation, the bookmakers would break even over time. However, bookmakers are in the world of sports gambling for the profit. Therefore, they have to skew the odds a bit to make the situation more favorable for them. The representation after the bookmakers adjust the percentages looks like this:
- Team A wins – at an odd of 2.50 ( 40% chances of happening)
- The match ends in a draw valued at an odd of 3.4 ( 29.4% chances of happening)
- Team B wins – at an odd of 2.5 ( again, 40% chances of happening)
If you sum up the percentages again, you will get 109.4% which means that the bookmaker has a 9.4% profit margin. So, in theory, for every €100 that is gambled on that specific betting market, the bookmaker makes €9.4. In the video above, this will be further elaborated.
The wisdom of the crowd in relation to the odds
We have seen how a bookmaker decides on their opening lines. Now, it is time to check out what exactly happens between the moment the odds are published and the first whistle of a football match. This is also called ‘the closing line’.
In reality, the bookmakers’ intention is not to get the prices right so that they benefit in case one team wins. The real challenge is to get the book balanced in such a way that they do not care which of the teams wins because they are making a profit anyway. To achieve that, bookmakers keep a close eye on the bets that are being placed, as soon as the lines are open.
Closing line, the most efficient point of the market as a result of the wisdom of the crowd
The perfect time for value betting is right after the odds are published. From this point 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 bookmakers. In professional terms, it is called lengthening or shortening the odds. If an odd is so attractive that many punters put their money on that outcome, bookmakers shorten that odd to make it less attractive. At the same time, they will add value for the opposition so that they balance the number of bets each outcome has.
In other words, bookmakers (based on the ‘wisdom of the crowd’ principle) constantly adjust the chances of maintaining a balanced odd and avoiding exposure on one side. The odd offered just before the start of a match is called the closing line and reflects all statistics, news and knowledge. Therefore, this is the most efficient point of ther market and reflects the most accurate representation of the underlying probability.
Pinnacle Sports, the most efficient bookmaker in the market
The above-presented situation in which a bookmaker gets as close as possible to balance their books is what happens when the given bookmaker does not take a certain position regarding an event. Moreover, one bookmaker that very rarely takes positions on games is Pinnacle. Instead, they rely on highly professional odds management algorithms and allow the market to make its own decisions, as we 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, that means it is more efficient and a lot harder to beat.
Identify mistakes at other bookmakers
Pinnacle’s increased market wisdom can be used to estimate the real chances of a result. Moreover, if you are wondering why is that important, you will love the next part. Pinnacle Sports’ betting market is that accurate and enjoys the input of millions of (professional) bettors for every match. Therefore, we can use it to identify mistakes at other bookmakers and locate those value betting opportunities that we all seek.
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. After all, that is what sports betting is all about. Right? Now that we managed to shed some light into the subject of odds setting and the entire wisdom of crowd concept and that we provided the best Pinnacle sports explanation, all you need to do now is apply what you learned. We at Transparent Bets are here to help you grow your bankroll with sports betting!