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What is Chance?
Chance is more commonly referred in percentage terms where all possible outcomes in any event will total 100%. For example, when a coin is tossed, there is a 50% chance that it will land on heads and a 50% chance of tails.
Rolling a 6 sided dice means there is a one in six chance of any number being rolled or 16.66% chance when expressed as a percentage (six possibilities divided by 100%).
Understanding Odds
Betting Odds are a reflection of the chance of every possible outcome happening in an event. Bookmakers use the probability of an event to form odds (or prices) that reflect those chances.
There are a number of ways that online bookmakers can display their odds and most of them will give you the option of which type of odds you want to use. The following section explains the different types of Odds Available:
Decimal Betting Odds Explained
Decimal betting odds are commonly used in Europe (known as European odds). Decimal betting odds are calculated by dividing 100 by the percentage chance of an event occurring. For example, if you calculate an event to have a 20% chance of occurring then the odds would be calculated as 100/20 = 5.00.
Your betting stake is included in the odds so if you decided to bet on an event which has decimal odds of 5.00, winning would mean you would receive £5 for every £1 you stake.
Decimal odds multiplied by your stake equals the return. The odds show how many units the bookmaker pays out per unit staked.
Fractional Odds Explained
Fractional odds are traditionally used in the UK. Based on odds of 4/1, Fractional odds tell us that for every 1 winner you will have 4 losses. In percentage terms that equates to a 20% chance of winning and a 80% chance of losing.
Placing a bet on an event which has odds of 4/1 will mean you will win 4 units for every 1 unit you stake plus you receive your stake back, giving a total return of 5 units.
UK odds multiplied by your stake equals your profit. The odds show how many units of profit per unit staked.
American Odds Explained
American odds are also known as lines or money line odds. If you want to bet on American Sports or you are using an American Bookmaker then you will need to understand how these odds work. If the odds have a "e;+"e; sign then they show the amount won for each 100 unit stake. A "e;-"e; sign shows how many units you need to stake to win 100 units.
Betting on an event which has decimal odds of 5 (fractional odds of 4/1) means the US Odds would be +400 while betting at decimal odds of 1.5 (1/2), means US odds would be -200. US odds can be divided into positive odds and negative odds.
How do Odds work in Practice?
Let's assume a Bookmaker is offering 2/1 for a horse and we are completely correct in our assessment of the race. Let's also assume we are going to stake £10 on the same horse in each of the 3 horse races. Probability dictates the following will happen.
| Race 1 - £10 at 2/1: | Loses: | Loss: of £10 |
| Race 2 - £10 at 2/1: | Loses: | Loss: of £10 |
| Race 3 - £10 at 2/1: | Wins: | Gain: of £20 |
Net result: Loss of £20 + Gain of £20 which means we have won nothing and lost nothing, in other words we have broke even.
So how can we estimate the Fair Odds?
In horse racing, unless you have studied form (past performance) for many years and are privy to information from stables, trainers and connections it is very difficult to assess a horses true chance of winning a race. However, thanks to the introduction of the internet we now have the most accurate method of assessing the true odds for any particular horse race.
The answer to our dilemma is the Betting Exchange. It is the most accurate measuring device of fair odds ever invented. It is assumed that anyone reading this is already familiar with betting exchanges such as Betfair, if not check out our guide to Betting Exchanges.
This information is a major factor when selecting the Daily Tips on this site.
The Hunt for Value
The job of a punter is to constantly be on the hunt for "Value". Value is where we can find odds greater than the true odds of the event happening.
Bookmakers are excellent judges of the true odds of an event happening (otherwise they would be out of business), but they are subject to market forces. This can be seen every day.
For example, the Bookmakers open the betting with the First Favourite of a Horse Race priced at even money (1/1). Therefore their estimate of the First Favourite's true odds is probably just over even money, maybe 11/10 or 5/4.
Joe Public, however, really fancies the Second Favourite and so starts betting heavily on this. In order to balance their books, the Bookmakers needs to make the First Favourite more attractive to punters and so will lengthen the odds and at the same time shorten the odds of the Second Favourite.
Their initial estimate hasn't changed; they still believe the true odds of the First Favourite to be 11/10 or 5/4. If this trend continues and the First Favourite continues to drift beyond 5/4 say to 6/4 or 7/4, then this is an opportunity for the shrewd punter to bet on the First Favourite as the value is outstanding.
Let's see how this works in practice over 100 races where the First Favourite drifts from even money to 7/4.
| Bookmakers original Odds: | Even Money | (50% Chance) |
| Bookmakers estimate of True Odds: | 5/4 | (44% Chance) |
| Actual Odds Obtained | 7/4 | (36% Chance) |
Over 100 races at True Odds you should win 44 races and lose 56. Therefore at 7/4 odds for a £10 stake it would look like this:
| 44 x £10 x 1.75 | = | £770 | Winners |
| 56 x -£10 | = | -£560 | Losers |
| Profit / Loss | = | £210 | |
| Return on Investment | = | 21% |
This is a fantastic return.