What's the S.P.

We know the bookmakers are there to make money.

We know that the real probabilities in an event add up to 1 (a 100% book).

We know the bookmakers load their prices to give a probability greater than 1.

Armed with this information we are going to do our own pricing. We are not setting the prices the way the bookies offer them. Forget pricing up a snooker match as 8/11 versus 1/1. That is a biased price. We are going in unbiased – our calculations for an event will produce a probability of 1.

There are several ways of compiling odds, including pricing models to calculate likely outcomes for an event.  People pore over statistics to create their own prices. Football matches aren’t just about looking at a league table. Within a match there are many dynamics including shots by each team and expected goals according to where those shots were taken from. Analysis has been carried out to a much greater degree over the last few years which is something to bear in mind if you fancy your chances of beating the book.

The first approach is a default method and gets you in the ballpark to make you think if the bet you’re having looks like a decent value bet. Take what it is you want to back and see what is left over at the end.

Consider a game between Everton and Liverpool. Liverpool are a 1/2 shot and you think that looks good.

A 1/2 shot has a 2 in 3 chance of winning, which is a probability of 0.667.

A bit of research suggests to you that a draw is around the 11/4 which is a probability of 0.267.

Add the two probabilities together and we get 0.934. Take this way from 1 and we are left with Everton’s chance of winning the game, which is 0.066 and this translates to odds of around 14/1 ((1/0.066)-1).

The bookmakers only offer 6/1 Everton, so now is the time to decide. If you were the bookmaker would you be happy letting somebody take 14/1 about Everton? If the answer is yes then backing Liverpool at 1/2 may be a reasonable thing to do.

There is another question to ask. Do you make money on a regular basis, enough to keep showing a profit? If the answer is yes, then your approach may well work but, if the answer is no, then you’re most likely falling prey to the bookmakers’ margins.

An unfortunate aside is that you need to keep an accurate record of your betting successes and failures, something which isn’t always easy, requires strong discipline and takes time. Like most people I am eager to record my winners but much more reticent when it comes to the losers. I have come to accept that winners and losers alike need to be recorded but the glory days are monitored much more readily than the disasters.

Recording your transactions is not only useful from a profit and loss perspective. It allows you to track back and see where you may be enjoying success and what types of trades could be proving costly.

If I lose money on a bet my approach is to ask myself this question. If you put me in exactly the same position with the same information would I do that trade again? If the answer is yes then I have no complaints and move on. If the answer is no then I consider what made me make the trade and why I now look at it differently.

Missing a winner can be frustrating but avoiding a loser can be of similar financial impact. Patience is called for. Further opportunities will present themselves.

Another approach is to price up an event without seeing what odds anybody else is offering. Not quite so easy to do but let’s consider the evidence. Everton, hoping to sit in the top half of the table with Liverpool flying high. It has the makings of a Liverpool win and remember there are clans of people paid to price football matches up using a wide variety of statistics.

Perhaps I would come up with:

Everton 0.125 7/1

Draw 0.25 3/1

Liverpool 0.625 8/13

There is no need for me to create biased odds because I am not the bookmaker. Nowadays there is the facility to lay bets on the exchanges so an unbiased price makes sense from that perspective. My probabilities add up to 1. What I am looking for is a bookmaker who will give me bigger odds than I believe them to be.

Maybe I find these best prices:

Everton 7/1

Draw 7/2

Liverpool 2/5

The price which appears more generous is the draw. My probabilities say 25%, the bookmaker says 22%. On this basis the draw would be the selection.

Let’s assume I back the draw at 7/2 for £10. If it wins I get a return of £45. According to my calculations I will win an average of 1 in 4 times, so if they played each other four times and 1 of the games was a draw I would have staked £40 and received returns of £45. In theory the odds are in my favour.

There is still that nagging question of ‘are my odds any good?’. It’s one thing to have an opinion and price something up, it’s another thing to do it better than the bookies and time will tell. Patience again!

Betting is an emotion driven pastime but ask yourself this. What other hobbies or activities are there where somebody has a vested interest in you never getting any better at what you are doing? Enter stage left the bookies who don’t want to see this sort of analytical, reasoned behaviour. The worse you are the more popular you become!

The challenge is finding the time or the inclination to compile odds for events. However, it’s worth having a go at pricing something up as it leads to increased awareness of how the betting markets operate. Part of the challenge is avoiding bad value bets – usually the ones bookies are suggesting you have. Putting an unbiased price on an event can help identify when you are being taken for a walk.

Even if you have no desire to record your bets you can still get some idea of how good or bad your transactions are by putting a price on them.

For those curious to see somebody else’s estimates, head off to the Analysis page where I like to think you will find well-reasoned discussion and pricing.