The Secret Strategy for Betting That Beats Online Bookmakers
If you've ever been lured by a flutter you will know how bookmakers, casinos stack the odds against yourself. Roulette, which has 36 red-and-black numbers as well as the green numbers 0 (in the U.S.), and 00 is the best example. That's 38 possible options. If you bet on red or blue, your odds of picking correctly are 18/38. The fair payout for a $1 stake in betting is $2.111. The house receives $2, and keeps the difference. This guarantees it a profit.
The bookmakers have a similar bias when it comes to betting on horse racing, soccer and any other sporting event. The bookies ensure that the odds in their favor are always in their favor. These odds are harder to set than for roulette, because the calculations can be more complicated.
That raises the possibility of a very exciting possibility. Is there a way to better calculate the odds of winning and beat the bookies?
Lisandro Kaunitz, University of Tokyo, and a few friends have provided us with an answer. They have created a way for soccer fans to make consistent money by betting online.
However, their work is not without a caveat. Kaunitz and co. claim that the bookies stopped researchers from further betting as soon as they learned about this success.
Although gamblers have tried many schemes to beat the odds over the years, they rarely succeed. Bookmakers put a lot of effort into calculating accurate odds. They usually employ teams of statisticians who study historical data about a particular sport, such as soccer. Then they create sophisticated models to determine the best odds for each game.
Kaunitz and co. claim that nobody has ever been capable of beating this system by creating superior statistical models.
Despite their sophisticated approach, bookmakers still have a weakness. It is the way they hedge bets to prevent large payouts.
When two teams play soccer, the bookmakers will set odds that each team will win, lose, or draw. A lot of people may bet on an outcome that is not related to the odds. For example, a team might be more popular or less popular than expected. The bookmaker can expect a huge payout in this case.
Bookmakers can hedge their bets with more favorable odds for the opposite outcome. They can attract bets that will cover at least part of the losses.
Kaunitz, co. say that this process opens up a window for anyone who can spot it. Researchers developed a method that detects odds favoring punters over bookies.
Their method is very simple. The bookies assume that they are experts at setting odds and that prices they give are accurate reflections of real probabilities of winning, drawing, or losing.
This is because the average of all the odds offered to them by all bookies, which is a form of wisdom of the crowd, can be used to measure these probabilities. This calculates the average odds. Kaunitz & co. claim that this is a remarkable reflection of the actual probabilities.
It's then simple to look at all the odds offered and to identify the outliers. Kaunitz, co. then determine the odds of outlying events being favorable. If the odds are favorable, the bet will pay off in the long term.
Kaunitz, along with his team, did exactly this. They created a Web crawler to collect odds from online gambling companies for soccer games across the world. They calculated the average odds and found any outliers. Then they worked out whether a wager would favor them.
The researchers first tested the idea with historical data covering 10 year's worth of soccer games between 2005 and 2015. This simulation was successful in paying out 44 percent of the times and yielded a yield of 3.5% over a 10-year period. They say that for an imaginary stake at $50 per bet, this would result in an equivalent profit of $98,865 on 56,435 different bets.
The important question is whether or not this result was pure chance. Could they have just been lucky? They compared their results to 2,000 simulations, in which they placed random bets on identical games. The results were as follows: 39 percent of bets returned a return of 3.2%. This is equivalent to a loss of $93,000.
The team was then able to calculate the probability that their first result had been a fluke. "The probability of obtaining an increase in return than or equal $98,865 for 56,435 bets using random bet strategies is less that 1 in a million," they state.
Kaunitz & co had every reason to believe their method would work out in the real world. However, there was one problem. Normal punters can't always place bets on the closing odds. These odds can differ significantly from those given in the lead-up to a particular game.
Kaunitz, along with others, decided to simulate the game. "We decided to do a more realistic simulation where we placed bets at odds that were available between 1 and 5 hours before the start of each game," they said.
This is the reason why the odds of winning are not publically available. So the team created a bot to gather these odds from all the major betting websites from September 2015 to February 2016. This data set was used to test their approach.
The results were even better. Their bets were successful 47.6% of all the time. They also earned a 9.9% return. Their strategy would have yielded $34,932 in profit if each bet had been $50. This is across 6,994 bets, they claim.
Surprisingly, a random strategy for betting on the same data produced a return rate of 0.2 percent and a profit amount of $825. It could be because of intense competition among online gambling companies, which often offer more favorable odds to draw punters in a type loss-leader strategy.
Next, the team tested the strategy using "paper trading", which is a method in which they use fictitious data to place bets. This is crucial because it allows them check if the odds they are quoted with an online betting site.
In fact, they found that 30 percent of the time the odds had changed after they checked online. In these cases, they decided to cancel the bet.
However, the strategy was still profitable. After three months of paper trading, the bets returned a profit at 5.5 percent. The bets earned $1,128.50 for 407 bets of 50.
Kaunitz and co. state that "at this point we decided not to place bets on real money."
The same approach was used for five more months. However, a human operator would place an online $50 bet after checking the odds. Over 265 bets, they were able to make a profit of $957.50 and their bets returned 47.2 percent. This is an impressive return of 8.5%.
The number of bets placed by paper traders was much lower than that during the paper trading period. "This is because we didn't have an operator dedicated to betting 24 hours a daily and we therefore missed many bets that could have been placed," they explain.
However, the lower number of bets didn’t matter. Kaunitz, Kaunitz, and co. state that the strategy was profitable through paper trading as well as actual betting.
It's an innovative approach with a surprising result. Kaunitz, along with his associates, discovered an Achilles’ heel in the betting sector and made their own profits.
However, their tale comes with a sting. According to the team, "We played according to the sport betting industry rules, but a few month after we started to place bets using actual money bookmakers started severely restricting our accounts."
The bookies might limit the stakes they can bet on or recommend a "manual examination" of the bet before accepting it. These situations meant that the team couldn’t place their bets.
The profitability of the strategy shouldn't be affected by the fact that the bookies chose which bets they would place at random. Kaunitz, Kaunitz, and others argue that this is unlikely and that bookies' actions could have seriously affected them. They state that "under these circumstances, we could not keep with our betting strategy."
Kaunitz, Kaunitz, and Co are clearly unhappy. "The sports betting industry has freedom to publish and offer odds for their clients, but these clients are expected lose and can be prohibited from betting if they win."
This type of practice could be illegal, the team points out. "Advertising goods and services with the intent not to sell them as advertised or advertising goods, services, or with no intent of supply reasonably expected demand but with an intention to lure clients to buy another product (a practice commonly called 'bait', 'bait and switched' advertising) is considered false advertising. This can carry pecuniary penalty in the U.K.., Australia and the United States of America. Sports Betting - The Secret of the Formula
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