Monday, Oct. 20, 2014

Transforming Error into Profit: Profitable Football Trading on Betfair Part 2

This is the second of a series of articles which will discuss strategies for making profit from trading football on Betfair. I would like to look at a subject that often arises , namely value betting.

You can see part 1 here if you missed it:  Transforming Error into Profit: Profitable Football Trading on Betfair Part 1

What I am about to say may surprise some people: The value of value betting is often exaggerated.  But please do not misunderstand me: searching for value is often a sensible thing to do, after all who wants to place a bet at 5/1 if it is available elsewhere at 6/1?  And indeed with some strategies it is an essential part in the repertoire.  A good example of this is arbing, as for example the recently featured UCan’t lose service, where unless you can find value in the bets, you will not make a profit.

So before explaining further what I mean by ‘exaggerated’, lets remind ourselves what is meant by searching for value.

When a bookmaker prices up a market, they make use all information they have available to firstly work out the probability of an event occurring.  To take a simple example, if they decide to open a market on whether England win the toss at the next Test match, the answer is clearly 1 in2.  This would correspond with odds of evens (2.0 on Betfair).  Of course if they were to actually offer such a market, it would have no value to them- as on the whole they would lose as much money as they make; and since the main aim of bookmakers is to make a profit, they would quickly go out of business.  So instead, they would offer a price of, say, 1.9.  The difference between the price and the actual probability is known as the mark up.

One aim of the successful bettor is therefore to find markets where the price represents more than the estimated probability of an event happening.  And this is known as searching for value.   Clearly sporting events are not as straightforward as a toss of the coin – but the principle is the same.  And clearly in the betting exchanges, such as Betfair, the price is determined by the bidders rather than the bookies, but again this means that some markets will offer value as the bidders may have over or underestimated the chance of a particular outcome.

So far so good, it sounds like a sensible thing to do – and indeed it is.

So what did I mean by saying its importance is often exaggerated.   Well this is simply the case where the only criteria is value.  For example, I often see recommendations in the press that team A is going to win but that you should not back them as they are only on offer at, say, 5 to 1 on (1.2).  In fact, what the tipster is doing by this is using value as the onlymeans of rejecting a bet.  What in fact you should do before rejecting a bet is take into account is just how likely you feel team A  is to win, and to do this there are a number of factors to consider.  Certainly, at odds of 1.2 you would need to be far more sure of the team winning, as for such a bet to be successful in the long-term you would need to be correct more than 4 times out of 5 on average.   And clearly at some odds, such 1.01 (the lowest available on Betfair) it would be, to borrow from the former Chancellor, George Brown, imprudent to pile on!

But to show you how exaggerated the value of value betting can be, suppose you selected 20 bets at 1.2 all of which were considered ‘poor value’, and suppose 19 out of these 20 win.  This basically means that you have been able to use your own judgement to filter out the times when the ‘poor value’ bet would lose.   Since you only need at least 16 out of 20 to break even, you would be in a long-term profit situation.  Equally, if you selected 10 bets at 3 to 1 (4.0) which were considered good value and all of these lose, then the value of value is quickly seen to be zero!

I am assuming of course that you were not just relying on luck, as then you would indeed be at the mercy of poor value and would in the long-term lose, which why such people are the bookmaker’s friend!

All this can be summarised by saying that a bet is only poor value if it losses and good value if it wins (or wins enough to profit in the long-term).

Adopting this winning mentality is much more likely to give you good results and therefore profits in the long-term.

As I mentioned, unless you are following a system, you need to take a lot of factors into account when deciding to get involved in a market.  One of those is certainly value, and indeed if you are using a betting strategy you need to know what range of odds is going to give you a successful long-term profit.

In the end, the most important factor of all is whether you will win, and so in the next part of this tutotial I will look at some of the other important factors you need to consider for profitable long term betting.