With more than 90% of gamblers losing money in the long-term and seeing that the bookmakers have soaring profits, it is important for people to realise that there has been a lot of research in psychology, statistics and finance. Continuous education can help punters make more prudent investment decisions and enhance their betting bankroll. Here are the most prominent theories that I believe can help gamblers with their betting:
Law of large numbers
The theory of large numbers suggests that with a large number of repeated events, the average outcome will be closer to the mean (average). That is why bookmakers make money! If they were only providing one sport event, say Aston Villa – Wigan, they may give odds of 1.95 for home win and 1.95 for X2. In such case, the bookies believe that the odds should be 2.00 and 2.00 respectively – therefore 0.05 is the margin they are taking. However, bookmakers are exposed to risk outside their control, for example, punters placing much larger sums on one team. As a consequence that will move the odds line, since the bookmakers must balance their books and ensure profit or limit losses. Therefore, from these specific and other similar events punters could be increasing their betting profits and grow their bankroll in the long term.
Nevertheless, bookmakers have analysed and hedged that risk very carefully and offer millions of options over different sports and leagues - punters can put their money even on political bets and Eurovision predictions. The bookies are not only achieving great diversification, but in the long-run, they will be winning mainly from the margins due to the law of large numbers. On the other hand, bettors have to work hard and be extremely selective when placing bets so they only back selections where the bookmaker have low or zero margins. Building and managing a well-balanced betting portfolio is not an easy task it requires specific knowledge, consistency, discipline and a lot of patience. We strongly recommend reading our article that explains the concept of the value betting, will indeed help you to improve your betting strategy.
The law of large numbers is more often than not difficult to perceive at the very beginning as it sounds irrational to believe that if you are on loss for 3 months in row the strategy you are following can still be profitable at the end of the season. To further clarify how the law of large numbers work and why is so important here is an example.
Let’s say Atletico Madrid plays 1000 games in a row and has odds of 2.00 (50% probability) to win each of them. Our expectation would be that they would win half of the time at least 500 games (50%).The chances of Atletico to win all 1000 games is 1/x – where x is a number with 301 digits – almost never going to happen! This is due to the law of large numbers.
However, if Atletico plays 4 games in a row and has odds of 2.00 to win each of them, we cannot expect the law of large numbers to work! We only have four observations here and although Atletico winning exactly 2 times seems statistically the most likely scenario, the potential deviation from it is very large! There is 1/16 chance that Atletico will win all its games which is a relatively high proportion.
People would generally expect that if a team has had a short series of “unlucky” games, then tables will turn (e.g. if Atletico loses the first two games of the four scheduled to be played) – and the people who see betting as a gambling activity would be more likely to back that club. Thus, people who do not understand the concept of low of large numbers will often be making uninformed bets that benefit the bookmakers. Therefore, we recommend being cautious with such blind trend betting. However, if you are deploying enough efforts and use analytical tools such as bet tracker and have been utilizing data and statistics to assess risk – then you could find value bets and ensure long term profitability.
Efficient market hypothesis
This theory is one of the main reasons finance is a prominent academic discipline today. According to this hypothesis, the market prices incorporate all available information and are considered to be the fair price for a given asset. The investors who can beat the market in the long run are highly respected and desired from all sort of investment funds. As we are more into sports betting, let us provide an example for the sports betting industry and how the fair price works. For Instance, let’s say the odds for Arsenal to beat Manchester City are 2.50 and all information has been taken into account. Now let’s imagine than Sergio Aguero gets injured a day before the game starts and the fair odds for Arsenal victory become 2.30. According to the theory, there will be so many people that would want to bet on the Gunners that prices will drop to 2.30 with no trading occurring – without anyone being able to place a bet.
In reality, there are a lot of examples of clever market manipulations and actually, in lower leagues, markets are nowhere near so efficient – read why and how to increase your profits by betting on lower leagues! One of the major difference between the sports and financial markets is the existence of bookmakers who can adjust prices when they want – often due to superior information in the top echelons, as they are sponsoring a lot of teams (e.g. bet365 sponsors Stoke City). Despite these exceptions, in reality, markets are indeed very smart and efficient and do incorporate more information than people realise due to the many informed actors involved (e.g. hedge funds, great tipsters). Therefore, bettors have to possess a good understanding of statistics, analysis, have fantastic tools for research (or follow an exceptional tipster who has these traits) and must use a betting tracker if they want to control their finances. Perhaps here is a good occasion to remind you that you can now import your old not very functional excel spreadsheet sto Bettingmetrics and start benefiting from our advanced analytics straight away - it is really easy and it takes just a few step to do it.
Law of small numbers
This is another psychological bias of people – to think that a small number of observations will be representative. One way in which this applies to sports betting is when you look at tipsters’ records. I have seen on verified platforms people who start with say 3 out of 4 winning bets and detailed argumentation. They immediately attract a very large follower base – as people expect that the advisors’ “magic” will continue. Sadly, more often than not, these tipsters quickly net some losses and some of them get too pressured by the overwhelming amount of attention they receive and start making overly aggressive bets or are worrying too much about their followers. In case you are keen to gain some extra knowledge here is a full guide of how to choose a tipster.
Green Lumber Fallacy
One of the more surprising fallacies on the list – it is essentially the bias of people to incorrectly believe that they have valuable information. Some investment banks hire people to build mathematical models – these smart guys do not even know what these models are used for. Nevertheless, such tools could be used for great profitability. A lot of my friends are watching football more often than me and certainly know more about the game than myself. However, I am the one who is yielding profits from his bets on sports and a lot of my peers have lost thousands throughout the years. Why?
The reality is that I have large databases, I have a good understanding of statistics and mathematics, I have an analytical degree from a top 10 UK university and I have excellent connections in the industry. For me, these contribute to 90% of my success as a tipster and investor – the other 10% being due to my knowledge of football. Being able to evaluate risk in a game is usually more important than knowing the sport very well. Even some of my colleagues, who are former professional players, are achieving good ROI because they have taken years to polish their risk assessment approach.
In behaviour finance, it has been found that people usually hold stocks they are familiar with – for instance, an employee working in the retail industry will be more inclined to hold a stock of Sainsbury or Tesco (major UK retailers) due to “knowing them better”.
It is very much the same with sports betting – people tend to bet on grand names like Real Madrid or on their local team. For instance, a resident of Morecambe will tend to bet on Morecambe FC. Such bets are usually made spontaneously and rarely have rational analysis behind them – it is all due to being “familiar with the squad”.
I have watched almost all the games of Arsenal this campaign but I have not made a single bet on a game in which they are involved. Yes, the team is very familiar to me but I realise that it takes much more than watching games and scrolling the sports section of The Telegraph to beat the bookmakers in competitive markets like Premier League. Instead, I usually bet on events from obscure countries, and my records show 10% ROI over the course of four years.
This is one of the biggest dangers for gamblers and this is simply the tendency of individuals to overestimate their willpower in the face of temptation. A lot of problematic gamblers believe that by placing restrictions on their accounts such as deposit limits they are already implementing excellent bankroll management. However, bookmakers are bombarding their customers with daily offers and unique bonuses – in reality, very few people manage to solve their gambling issues without outside support.
Another trait of the restraint bias linked to sports betting is the attention people pay to fixed games. There are numerous Facebook groups and solo players who are consistently spamming, usually from multiple accounts, about games with a guaranteed outcome. A lot of people, unfortunately, fall for such scams, as the temptation of a certain profit is too high. Avoid that type of people or betting group at any price!
At the end of the day, all bettors are prone to make mistakes but if you are consciously thinking about potential financial and psychological difficulties you may face in your journey to enhance your betting bankroll, you certainly have a solid foundation to achieve long term profits from sports betting.
Please note that any previews, recommendations or information available on the Bettingmetrics website is just with informative purpose. All betting activities do involve risk, please bet with funds that you can afford to lose. Bettingmetrics cannot be held responsible for any gains or losses occurred as a consequence of information found on the Bettingmetrics website!
About the author:
Nikola Baltov is a highly renowned professional tipster with 4 years of experience in the industry!