Many people start their betting journey with the same question. How do odds work, after all a bunch of numbers on a screen can be mindscrambling and overwhelming at first!
But betting odds are arguably one of the most important parts of betting and without understanding betting odds you will have a difficult time becoming a successful bettor, you could win multiple bets in a row and make only a small amount of money if you don’t understand odds which is a poor way to start your betting career.
So with that being said, it’s worth putting the time into understanding betting odds thoroughly and in this article we will help you do that, read on to understand betting odds and understand the risk/reward of every bet you place and how to increase your profitability.
What are Betting Odds?
Bookmakers present their odds in decimals or sometimes fractions. They all look different but will mean the same thing, you’ll most likely see them in decimals with the most popular bookmakers so we will also refer to odds in that format in examples later on in this article. At a basic level, all odds regardless of their outcome, are a representation of the probability of something happening.
When you become a bettor, your objective is to assess the chance or probability of an event happening and then a bookmaker will use odds to imply the probability of certain events & outcomes.
Using probability in betting can also help you compare odds between bookmakers. However, if you consider betting to be just about odds, you’re missing a larger picture of understanding odds. To really expand your understanding of odds and betting, you must also understand how to calculate probability.
With a good understanding of how to calculate probability yourself and how it compares to the odds provided by the bookmaker, you can begin to make more informed decisions when it comes to what you should bet on, when you should bet and how much you should stake for the bets you make.
The basics of probability
Every day you face probabilities, the probability that it will rain today, the probability of reaching your next destination safely and so on.
How often do you think: “What are the chances of me being late for work?” or “How likely is it to rain when I have football practice this evening?”
We rarely attribute a numerical figure to answer these questions and instead use words, such as not very likely or very likely, but when you’re dealing with bets, you are dealing with a question of probability, visualised in a numerical form.
In the simplest of terms, the probability is a scale running from 0 (where there is no chance of an event occurring) to 1 (a certain future event). The likelihood of all other potential outcomes falls somewhere in between those two endpoints of the probability spectrum.
A coin toss is a great way to explain how to calculate probability because we know the true probability for each outcome. The coin will definitely land on either heads or tails, which taken together provide us with a certain event. We now know this certain event has a probability of 1.
Of course, as a bettor what you really want to know is the probability (or chance) of your chosen call, which we will say is heads. To do this there is a simple equation:
Favourable outcomes / All possible outcomes
Here is a basic example:
If you are calling heads, then the favourable outcome will be heads. Therefore to get your probability value, you divide the favourable outcome (in this case there is one, heads) by the number of possible outcomes (this is two as it will either be heads or tails). This leaves us with a probability of 0.5.
In general, people are more comfortable with percentages, so by multiplying the probability of your event (0.5 for heads) by 100 you can say that there is a 50% chance of the coin landing on heads, and you win your bet.
How to calculate betting odds
Getting a handle on how to calculate probability yourself and converting it into odds is the first step in developing your own assessments of betting potential risk and reward.
Once you know how to calculate probability, turning that figure into odds is a straightforward process.
You can arrive at the Decimal odds value for your coin toss choice with the simple equation:
1 / probability for your chosen outcome
So the Decimal odds for a coin being heads is 1 (certainty) divided by the probability of it occurring which we know is 0.5, producing decimal odds of 2.0. At this point you can equally take odds and reverse engineer the implied probability with the inverse of the equation for turning probability into odds:
1/decimal odds = probability
Take your newly found knowledge and work out the implied probability for your coin toss with your friend and you’ll see the implied probability of both outcomes in the coin toss is 100% – (0.5/1+0.5/1)*100 – no surprises as a certain event is 1 (100/100).
However, performing the same calculation for actual odds from your favourite bookmaker will produce a value greater than 100%, we’ll explain why in the next section!
In simple terms, the odds don’t reflect the true likelihood of the outcomes concerned with an event. The amount by which the implied probability diverges from 100% is the margin the bookmaker has added to that particular that market.
This is an essential piece of information for a value-seeking bettor as it highlights the true cost of placing a bet with a bookmaker.
While it is important you are able to use the above information to convert odds into probability and calculate a bookmaker’s margin, you don’t have to do it yourself for every single bet. If you want a quick way to calculate how much margin a bookmaker has applied to the odds, you can use a margin calculator.
As with any business they’re running to make a profit, so they will be taking a portion of winnings from every bet known to bettors as margin, this is normally between 2% and 10% and will be reflected in the odds offered on a bookmakers site or apps.
Do Bookmakers want me to lose?
Betting companies will hope that they get bets on all outcomes that they offer, which allows them to guarantee a win regardless of the outcome of the event.
In Football, if 100% of bettors placed stakes on Team A and no one placed bets on Team B and then Team B won, this wouldn’t be the desired outcome for anyone involved, including the Bookmakers, this would be called an imbalanced book which could result in losses. Bookmakers always aim to create a balanced book that allows them to make the same amount of money regardless of outcomes.
If particular odds receive many bets that a profit becomes a loss, the odds will be adjusted so that the bookmakers can guarantee a profit.
If Team A has odds to win of 10/1 which attracts a huge amount of bets being placed while Team B has 3/2 odds and no one is placing bets, there is a high chance that the bookmakers will adjust this by reducing Team A odds and increasing Team B’s odds.
This movement can give punters an idea of where the smart money is being wagered and they can follow
It should be clear now that bookmakers have an advantage over their customers. It is true that they don’t win money in every single market they are pricing but they are always focused on guaranteeing a profit to ensure they are making money in the long run just like any other business.
Their profit isn’t just because of their profit, however, as odds are not always stacked against you. Their success is also factored by poor betting decisions, it is a well know statistic that 90% of sports gamblers will lose money over a year and that is a huge factor as that means there are fewer payouts.
Figuring out your Payout
Calculating odds and probability opens up a new world for calculating value but you also want to know what your bet will payout if you win. For our coin toss example this requires a simple multiplication:
Your stake X decimal odds
So if you bet £10 on heads with odds of 2.0 your return including stake is 2.0 x £10 which equals £20 (this includes your £10 stake + £10 profit of course, so it isn’t raw profit, your profit is £10).
Being able to calculate probability and understand where odds actually come from is an essential part of evolving as a bettor because it enables you to calculate your own expected frequency for an event, allows you to look for potential quicker instead of using a calculator every time and allows you to train your brain into scouting for good odds and comparing what you think will happen with what odds are available.
Where the two diverge you can potentially turn that edge in your favour, and generate profit, which is what a bettor should be focused on.
Now you know the basic math on how to calculate betting odds!
Further Information & Examples
As you start out on your journey as a bettor, the first thing you’ll need to understand is betting odds.
Betting odds can appear confusing but when you get your grip around them you’ll understand how likely a potential outcome is to happen and the probability you will win a bet.
Why do we have Betting Odds?
As a novice in the betting industry, you might wonder why we even have betting odds, you could just bet on any team and if you win, great! and if you lose that’s the end of it. This sort of betting would be similar to casinos, for example, on a dice, you roll it and have a 16% chance of being right no matter what you pick.
But Betting odds make things more interesting the chance of two teams against each other winning or losing is not necessarily 50% down the line.
Calculating the Probability of Winning
With Fractional betting odds, you can calculate the probability of winning, which as stated before isn’t neccessarily 50% as would be the case in a casino.
On bookmakers, you’ll find the probability of a possible outcome coming true. This can be represented in a fractional odd
For example in a football match between Team A & Team B you might see:
1st Goal – Team A 7/4
This is the probability of Team A scoring first over Team B
7/4 can be calculated as 4/ (4 + 7) = 0.36
This means that there is a 0.36 chance of Team A scoring first over Team B
With this we can measure the probability of winning. If we do bet on Team A scoring 1st, then the chance of winning would be 36%.
What else can you do with Betting odds?
Using the example above about Team A scoring the first goal, you can calculate how much you will win including your returned stake
7/4 for every £4 you bet, you will win £7
That means if Team A scores in the first goal, for every £4 you put into a bet, you will get a return of £7
If you did a £20 bet on Team A scoring the first goal you would get a profit of £35.
To work this out you can do the following:
- £20.00 / 4 = 5
- 5 * 7 = £35.00
That means you would make £35.00 profit, getting your original stake back too. In total, you would get £55.00.
You may also find decimal odds on some exchanges.
These are a different format to the fractional odds but are still very easy to work out, using the example of Team A scoring the first goal we can work out our winnings.
In Decimal format, 7/4 would be shown as 1.75
1.75 can be calculated as (1.75 * £20.00 stake) = £35.00 profit
This is the same result we got before with fractional odds
Often you’ll find betting odds in different formats, you can read more about Asian Handicap which aims to create more fair games with betting odds