How Do Bookmakers Calculate Odds?

How do bookmakers calculate odds

Ever wondered how do bookmakers calculate football odds? It is a complicated, software-driven process these days. The process is designed in such a way that the bookmakers always make a profit whatever be the result of the match: home team’s win, away team’s win, or draw.

How bookmakers work?

Bookies calculate the odds by looking at the history between the two teams, current form, expert human opinion and lots a data analysis. For example, if Liverpool are hosting Norwich City, everybody knows that Liverpool are most likely to win. Bookmakers do such calculations. But they do not just rely on it alone. They base their odds calculation on something called margin.

How do bookmakers set odds?

Let us take the example of Liverpool hosting Manchester United to find how bookmakers calculate odds. The current form hugely favours Liverpool. So the odds are something like this:

1.25
5.3
7.75
Home win
Draw
Away win

Now do a bit of math. Divide 1 by each of the odds. You will get

1/1.25 = 0.800
1/5.3 = 0.188
1/7.75 = 0.129
Home win
Draw
Away win

Now add these three figures. That is, 0.800 + 0.188 + 0.129 = 1.117.

Since there are three outcomes, one would think the final result to be 1. But the total is 1.117. This extra 0.117 is the margin of bookmakers. They make a realistic analysis of the actual results, but the calculation of odds is based on their margin.

How do bookmakers make money?

The odds will change according to the number of bets the bookmakers has received for each outcome. The odds will be adjusted to keep the margin of bookmakers intact. As they say, the house always wins. The bookmaker will make money irrespective of a Liverpool win, a United win or a draw. That is how they set margins.

That does not mean that punters will lose mostly. No. That is not the case. If you put your bet smartly and intelligently, you can win too.

Now you know how do bookmakers determine odds. This will help in analyzing the odds. Some bookmakers keep the margins high, while some keep them low. You can understand that as well from analyzing the odds in this way. Since you now know how bookmakers make money, you can plan better to pick the right bookmaker.

After all, you want the money to remain with yourself – not with the bookmaker alone.

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