This is the 1st out of a 3 part article series, which purpose is to investigate how one can make money from sports betting and the requirements of making a living from it.
Part 1: having realistic expectations AND Different ways to make money from betting
Setting realistic expectations
If you already feel like skipping this part you are the type that would benefit the most from reading it. Because first off it is important to have realistic expectations. As with anything in life, making money from sports betting requires time and effort. And those looking for getting rich quick with no or minimal work are setting themselves up for disappointment. Having worked in startups for the last 3 years, from both my own experience and those of others whether you have a job or are a student such as I was at the time, it often starts out as a side project. This is also how I view my betting currently. I’m building my bankroll on the evenings and weekends while working on Trademate during the daytime. Whether you are studying, have a 9-5 job or make a living from playing poker, I think this approach makes a lot of sense. It happens to be very compatible with value betting since that is when the majority of games are played anyway, and thus when the edges occur. Since I don’t need the money from my betting to cover living expenses it reduces my risk as I have more legs to stand on financially. It also enables me to reinvest any profits I make and keep building my bankroll. This, in turn, increases my turnover and thus my potential profits. I’ll keep doing it this way until I reach a point where it makes economic sense to do it full time.
Different ways to make money from sports betting
There are 2 main ways to make a living from sports betting.
The first is being able to pick winners. Which is what 99% of all tipsters and bettors out there are trying to do, and of which probably 98.9% are failing at. To do this successfully you would need to specialize in a market, preferably a small niche, where the bookmakers do not have the same level of information and knowledge as you, or where they can not interpret it as well. If you want to try and create your own odds models, this article can help you get started.
The second way is to find value in the odds. Finding value can again be split into three groups: 1) Matched betting, 2) Arbitrage betting and 3) Value betting. These can be ranked based on their potential risk and reward. The 3 ways and the pros and cons of them are discussed in this article. Also this guest post examines the pros and cons of arbitrage betting vs value betting. At Trademate we are all about value betting as this gives the highest potential return of the 3 ways to make money. The downside of value betting is that the risk is higher than for arbitrage and matched betting. Because one only takes one side of the game, the variance is higher (What is variance? These articles and This video explains it). Let’s use an example: If one takes a bet with 2.0 in odds, one can only expect to win 50% of the time. In the short run, anything can happen, e.g. losing 10 coin tosses in a row. But over a large sample size, let’s say 10 000 tosses, the distribution of the number of heads and tails will be pretty much spot on 50/50 (the theory behind it is explained in this article and our big data analysis has shown that it has worked very well in practice for the Trademate users).
In practice, the potentially high variance nature of value betting, means that one needs to be prepared to place hundreds of bets, maybe thousands depending on the avg. closing edge and odds before one can expect the variance to even out. Our interview series with Trademate users are a quick read, where you can learn from others who started out from the same point as you are at now. One thing they all have in common is that they have hit bad swings , but made it through them. We have had users who were breakeven at 1500 bets, before they hit a good run and their profits soared up and past their EV line (expected value). Before you start you should make sure that you understand the underlying principles of value betting, mainly exploiting market inefficiencies in our case. It is not for everyone and if you decide that it is not for you, then that is ok. But then one will not be making a living from betting anytime soon. Next, one needs to have the patience and discipline to stick with it, through both the up and downswings.
Reducing variance in value betting
Also, there are steps one can take to reduce the variance in value betting, such as placing on lower odds, only placing 1 trade per game, placing trades close to kick-off, using a proportional staking strategy such as the Kelly Criterion, and limiting it to 30% of the Kelly. Also, one should apply a max stake size. I operate with 1% of my overall bankroll. It is possible to set it higher and also to use a higher Kelly % if one wants to take more risk and increase the turnover.
Bookmakers limit winning players and how to increase your lifetime value
Whether it being matched betting, arbitrage betting or value betting, the soft books do not like winning players. To stop players from winning bookmakers will impose stake sizing limits on them. Without getting a solid turnover, making money from either option becomes really difficult. How long it takes varies from bookie to bookie. There are also internal differences at the bookies. All of this does not mean that it is not possible to extract good value from them first though! Also, there are steps one can take to make the accounts last longer before they get limited and thus increase the lifetime value of the soft bookmakers. A topic we have covered in multiple videos and articles, such as:
At Trademate we are currently supporting 60 soft bookmakers. Playing through all of them should take some time. Also, because we have so many different bookmakers and also trades to choose from, the number of people who pick the same trade is not particularly high and thus each individual account lasts longer. We also switch out a couple of bookies every few months to keep things fresh and have added 10 new bookies this year. So our overall value offered is constantly increasing.
Finally, what about sports trading? Traditional trading involves buying and selling assets. Sports trading involves either placing a value bet, an arbitrage or hedging a bet. Hedging a bet is basically to turn a value bet into an arbitrage bet. The difference between arbing and hedging is that when hedging, the bets are not necessarily placed at the same time. For example in an arbitrage you place a bet on the home, draw and away within a short period of time, e.g. 1 minute. When hedging you would first place a value bet on e.g. the home team to win. Then you can turn it into a sure win or a sure loss by taking a bet on both the draw + away team or an Asian handicap bet at a later point in time. Hedging enables you to reduce your risk, but it also reduces the potential profit. I have covered the topic of hedging a bet in this article.
In part 2 of this article series we will have put some numbers on the different input factors that affect potential earnings and run some simulations.