Odds are simply an expression of a more important value – the probability ratio. Becoming familiar with how to calculate the probability and convert it to European odds is the first step to start evaluating the value of your handicap on your own.
This is a topic that all experienced players have talked about countless times with friends and family who want to bet on the big games at will. x What are the odds? What does it mean? If I bet $x, how much can I win?
Understanding the football betting odds is the biggest challenge for any novice bettor. But what do the odds really mean, and how can you know the profit on a given principal?
Once you have solved this problem, you can then compare the odds offered by the bookies. However, if you think that betting is all about odds, you are missing out on a lot. In order for you to understand the odds and bets better, you must also understand how to calculate the probability.
There are many odds formats that exist for a reason (American odds, European odds, point spreads) because the odds are simply a tool to achieve a goal: to provide a handicap. The bookmaker is actually presenting a risk calculated using a probability.
Since we face risks every day of our lives, such as our chances of getting on a train or the chance of rain, it is surprising how unfamiliar the average person is with basic probability calculations.
This is a scale that starts with 0, which means that the event is unlikely to happen, 1, which means that the event will definitely happen in the future, and the probability of all other possible events that fall between these two numerical points.
Tossing a coin is a good way to understand how to calculate probability. The odds of a head and a number appearing on the board are always a fixed event, and we know the probability is 1.
Of course, as bettors, we will want to know the probability (or odds) of your choice of side, and here we choose heads. We can use a simple equation to calculate this.
Total Odds / All Possible Outcomes
Of course, as bettors, we will want to know the probability (or odds) of your choice of side, in this case we choose heads: so you divide the total odds by the two possible outcomes (heads or numbers), which gives a probability of 0.5.
In general, people are more used to using percentages, so let’s multiply the probability of the event (0.5 for heads) by 100 to get a 50% chance of tossing a head and a 50% chance of winning the bet.
1 / Probability of your chosen outcome
So the European odds for a head toss are 1 (exacta) divided by the probability of the occurrence, which we know is 0.5, giving a European odds of 2.0. At this stage, you can also use the football betting odds to invert the implied probability by replacing the probability in the equation with an odds ratio.
1/European Odds = Probability
Using your new knowledge to calculate the implied probability of a coin toss with your friends, you will find that the total probability of a coin toss with heads or numbers is 100% – (0.5/1 + 0.5/1)*100, which is, of course, a fixed event with a probability of 1 (100/100).
However, the same calculation for the actual odds offered by your favorite bookmaker will result in a value of more than 100%. Why is this so?
It’s important information for profit-seeking bettors, and the calculation is easy to do, but few bookmakers are willing to share it publicly, except for Pinnacle. The reasons behind this are worth looking into.
Calculating odds and contingencies shows a new way to calculate profits, but you’ll also want to know how to calculate your betting winnings. For our coin toss example, we need a simple multiplication equation.
Principal X European Odds
If you bet €10 on heads at odds of 2.0, your winnings including principal will be 2.0 x €10, or €20 (including €10 in principal + €10 in profit).
Knowing how to calculate probability and understanding how odds are really calculated is very important to refine your bets, because then you can calculate the expected frequency of events on your own and start building your own odds and compare them with the online odds.
When there is a gap between the two, you have the opportunity to gain an advantage and generate profits, which is what bettors should focus on.
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