How do Bookmakers set their Odds?

Bookmakers are at the core of online sports betting. Today there are hundreds of sports betting platforms, but bookmakers use a specific set of rules in all cases. Whether you are betting on football or horse racing or Mixed Martial Arts (MMA), the process of calculating odds is fairly similar.

Today we will talk about everything that you need to know about how bookmakers set their odds. We will also go into general tips for betting on the favourite vs the outsider.

At the same time, it is important to note that not all bookmakers use one exact method. But their methods are similar more or less. That being said, here are the things bookmakers consider to set odds.

Factors bookmakers consider for odds

Determining odds is basically determining the chances of one team or player to win over another. As common sense would tell you, the first step to determining odds is to determine the outcome of the match. But you cannot determine the outcome of any sporting event with certainty. That's why bookmakers consider the probability of one team or player winning over the other.

To do this, they take into account several factors. They look at a team/player's past performance, present form, team spirit, and other factors that may affect the performance of a team or player.

True odds could be evens for a win at home, 2/1 for a draw, and 5/1 for an away win. A 50 percent chance of a win at home, a 33.33 percent chance of a tie, and a 16.67 percent chance of a win at an away fixture are represented by those odds.

If the bookmaker had offered those odds, it would have been considered a 'fair book.' This is a betting market in which all of the possibilities' percentage chances total up to 100%.

After determining what they perceive to be the genuine odds of any specific outcome of a given game, a bookmaker would modify the odds downwards prior to actually providing them to bettors.

In the illustration above, the relative probability of each of the events (50 percent, 33.33 percent, and 16.67 percent) occurring has a 3:2:1 direct proportionality. That implies a bookie may opt to offer bettors an alternative set of three odds figures that have the same connection but are all lower.

How does betting affect bookmaker odds?

The margin that bookmakers come up with is presupposed on the assumption that real bettors would also bet in a similar proportion. In reality, that does not happen very often. The general sentiment in games is usually tilted more towards one side, and it also depends on a range of personal beliefs.

If a bookmaker accepts £120 in wagers and provides odds of 4/6, 6/4, and 4/1, they should estimate £60 to be staked at 4/6. Similarly, they expect £40 to be staked at 6/4, and £20 at 4/1. In that situation, they would only have to pay out £100 out of the total £120 stakes. However, if the sequence were inverted and £60 was staked at 4/1, the bookies would be forced to pay out £300, resulting in a loss of £180.

To balance and manage their liability, bookmakers may alter the odds at the beginning of an event. This ensures that deviating from the normative wagers does not pose the risk of bookmakers going bankrupt.

How do bookmakers make money from the odds?

Generally speaking, bookmakers make money by modifying and customizing the odds. That ensures that bookmakers take in more money than they give out. Bookmakers make money by ensuring that they retain some money no matter what the outcome of the match is. They do so by calculating the odds in a may that gives immunity to the bookmakers from losses. Bookmakers take the help of odd compilers to set perfect odds that are always profitable.

Should I bet on the favourite?

From a risk-reward perspective, betting on the favourite is a much safer option. Since the odds offered for betting on the favourite are low, you will not make a lot of money even if your pick wins. That makes it less lucrative to bet on the favourite.

Betting on the favourite has its advantages as well. For instance, the probability of the favourite losing is very low in some cases. For example, if Real Madrid is playing against Granada, the chances of the latter winning are very low. In that case, betting on the favourite is a much safer option. But there are advantages to betting against the favourite as well.

Should I be on outsiders?

Betting on the outsider is like taking a leap of faith. But in a few cases, it may not be that big of a risk. If you study a team or player intensely and are confident about them winning in an event, it makes sense to bet on the outsider. The primary reason behind this is that betting on the outsiders will give you a much higher return in case you win.

Betting for or against the favourite depends largely on your risk appetite. If your wager is an amount that you can comfortably risk, betting on the outsider is a much better option. Betting on the outsider is a better option only when you have a real idea of what's going on with the team and players and how realistic it is for them to win.

Conclusion on bookmaker odds

The process of how bookmakers calculate odds is both complex and diverse. The customers of a sports betting platform are largely unaware of how these calculations are done. We hope this guide will give you an idea of how bookmakers set their odds.

When it comes to the question of betting for or against the favourite, remember this simple mantra. Betting on the favourite is taking a low risk for a low reward, and betting on the outsider is taking a big risk for a big reward. Make your betting decisions based on this fundamental precept.