If we had to teach the average punter one lesson it would be this one. Understanding probability is the most important key to betting successfully.
All betting odds essentially represent an implied probability of an event occurring. That is, the percentage chance the bookmaker thinks that a selection or bet type will win.
The good news is, calculating this implied probability is super simple.
The formula is: 1/decimal odds
So for example, consider Adelaide are playing Melbourne and to win the Crows are at odds of $1.80.
We import the odds to the implied probability formula = 1 / 1.80
That results in an implied probability of 0.555
To convert this implied probability to a percentage all we need to do is times it by 100.
So, 0.555 * 100 = 55.55%
The table below shows some common odds both racing and sports bettors will see from bookmakers and the implied probability expressed as a percentage next to them.
RELATED: Kelly Criterion Staking Method
Conversely, we can also convert implied probabilities back into decimal odds.
Formula is: 100/implied probability
If the implied probability was 60% then the calculation would be as follows
100/60 which would = decimal odds of $1.66
Let’s take a look at a typical market for a Saturday horse race and decipher what the odds are telling us back into basic percentage form.
Please note that for the purpose of the exercise we are assuming the following to be a 100% true market where all the probabilities of each runner winning equal 100%.
Of course most markets excluding Betfair also include a sizeable bookmakers margin that we have to beat.
**Market above courtesy of Sportsbet.com.au
Using the market above we can see that the favourite is #2 Divine Ten at odds of $3.30.
Essentially that is implying a percentage probability chance of 30.3% of Divine Ten winning.
Where as, #3 General Truce is an outsider with odds of $11.
That can be converted to a percentage chance of 9%.
So Sportsbet’s market is implying that if the race was run 100 times than General Truce would win the race nine times.
**Please note that the above calculations are assuming a 100% market and does not factor in a bookmakers margin.
In summary…
Understanding probability and the role it plays in forming a betting market is critical.
So next time you look at the odds on your favourite horse or Football team, ask yourself these questions.
What do those really mean and what are they implying?