WHAT is value betting? Why is it important? We're delighted to have Alex Vella (@AlexVella_) from Trademate Sports on WLB to decipher the industry's most commonly used term in detail, ‘Value Betting'.
An introduction to Value Betting
Before I explain what value betting is, ask yourself: how do bookmakers make money? And no, it’s not because most people are terrible at predicting the outcome of a sports game.
They make money because they take margin on the odds of a game. So say Manchester United are playing Arsenal, and the bookmakers have rated United’s chances of winning at around 50%. This means their betting odds should be at evens (1/1) or 2.00 in decimals . But no, the bookies will offer you odds of 9/10 (1.90) or maybe lower, taking a 5% margin on the game.
Repeat this process over and over, and the bookmakers end up making a pretty decent buck! But what an effective value bettor is able to do, is to not only overcome the bookies margin, but get better odds than the implied probability of something happening. You’re basically doing the inverse of how bookmakers aim to make money from you.
What is Value Betting?
The best way to explain value betting is to use the example of a coin toss. Unless there is something wrong with the weighting of your coin, there is 50/50 chance of it landing on heads or tails.
If you were to bet on a coin toss with your friend, the correct odds should be evens (2.00) for heads happening and evens (2.00) for tails happening.
But what if I said I will offer you 11/10 (2.10) in odds if it lands on tails. If you’ve got half a brain you will take that bet any day of the week! Because the odds (11/10) are bigger than the implied probability of it happening (50% chance).
Yes, there is still a 50% chance you will lose that coin toss, you might even lose the first 10 coin tosses. But over time, over thousands of coin tosses, the number of times it lands on heads and tails will get closer to 50/50, and that small edge turns into more and more profits.
Value Betting on sports
So, how does this all relate to sports betting? Well, as you might know, the odds on a game are changing quite regularly. That might be due to a professional sports bettor placing a large bet on a team to win, or, a really important player being ruled out of a game. One of the best examples of this was a cup game between Chelsea and Manchester City in 2016.
Two hours before kick-off, the odds on Chelsea to win were at 1.77 at a Norwegian bookmaker called Norsk Tipping. One hour before kick-off, the teams were named, and to the surprise of a lot of people, Manchester City decided to hand out debuts to five teenagers, opting to rest some of their star players.
This heavily increased the chances of Chelsea winning, so the betting market responded, slashing Chelsea’s odds from 1.77 to 1.40. But Norsk Tipping were a lot slower to react, taking roughly 20 minutes to lower their odds to 1.40.
So in that time, you would have had a chance to place a ‘value bet’ on Chelsea to win at significantly higher odds than their implied probability suggested.
And just like the coin toss example, there’s still a chance Manchester City will win that game. But when you take that value bet over and over, probabilities suggest that you will end up being hugely profitable in the long term.
How can you find and place a value bet yourself?
There are a couple of ways you can do this. One would be using a value betting software like Trademate Sports, which uses an algorithm to monitor the odds of a sports event and signal when the bookies make mistakes, enabling you to exploit them. So in the Chelsea vs Manchester City example, they would send you an alert when a bookmaker has not made the necessary price adjustment.
Another way you can find a value bet is by doing it yourself. For example, you might find that in their past 30 games, Liverpool have scored three or more goals on 20 occasions. But when looking at the odds of their next game, you might find a bookmaker is offering odds of evens, which implies a 50% chance, when they have scored three or more goals in 66% of their last 30 games.
In this case, their odds should probably be lower, giving you the opportunity of a value bet. Note: There may be other reasons why the odds are set at evens, like Sadio Mane and Mohammed Salah being injured or they might be playing a really good defensive team.