There are lots of hurdles to overcome before you can expect to turn a profit from following a tipster. First and foremost of course it’s the tipster’s skill to identify value prices. Secondly you want the tipster to advise his bets at prices from a reputable bookmaker who does not restrict their customers. Additionally you need to deduct subscription fees from potential profits and bet placement fees if you happen to place your bets automated through a bot (like I do). Something that is not so obvious and sometimes hard to estimate is slippage, which also has a hefty influence on your bottom line.
Slippage is the difference in profits between betting at advised and betting at obtained prices. Say, you follow a tipster and his yield across 1000 picks is +4.50%. Let’s also assume that the actual yield you have achieved from these bets (by sometimes being forced to take lower odds) is +3.30%. Your slippage would then be 1.20% (4.50% – 3.30%).
Please be aware that slippage only affects winning bets. For a losing bet using 1 point level stakes your p/l is always -1, regardless of the odds you took beforehand.
Consistently taking lower than advised prices can eat massively into your profits as we will see below. In fact it can be the difference between winning and losing depending on the popularity of the tipster. Generally speaking the more popular the tipster the greater the slippage will be.
But just how much of slippage are we talking about? I will try to quantify this figure below.
Professional gamblers have developed a very impressive way of thinking and it’s proven that they possess a specific kind of intelligence other people don’t.
Check out this fascinating TED talk on risk intelligence by Dylan Evans, PhD in Philosophy.
Apologies to the well respected Joseph Buchdahl from www.football-data.co.uk for stealing the title for this article. I find it appropriate and creative at the same time so couldn’t resist using it. I swear the rest of the article are my very own words… 🙂
It is oh-so-tempting to check a half-decent tipster-platform and sign up with a tipster who is being promoted as the next big thing. Even for more experienced punters it is sometimes hard to resist.
Just out of curiosity I fired up my browser and checked a popular tipster platform which read the following stats for the tipster topping the table: 893 bets, 19% yield, 9524 followers.
Damn it, that’s too good to be true, isn’t it? For someone to show a 19% yield over such a ‘large’ sample he must have what it takes, right? Also if he continues that performance the €50 for monthly sub-fees are covered in no time…
But hold on. Are we missing something?
The majority of this article will deal with the financial investment world, but the principles are equally relevant to sports betting.
It is perhaps the greatest paradox in the investment world that many consistently profitable money managers have a large percentage of losing clients. I recently saw the records of a very successful US Hedge Fund, that showed over 40% of their lifetime client base had actually lost money while investing with the fund! This fund had a relatively consistent record of double digit annual gains over decades! This rather odd story is by no means isolated, it is repeated within many successful funds.
So, what causes this phenomena?
You hear a lot of sports bettors say it, “I beat the closing price on that bet” but what does it really mean and why is it important to winning when it comes to betting on sports?
The closing price is the betting price at the sportsbooks when all betting is closed and the game is about to start. It is the most accurate price because all of the money has been bet and all available information and opinions have been factored in.
Closing price value is determined by comparing the price on a bet placed at an earlier time with the price at game start time. If you placed a bet at 2.1 and the price closed at 1.75, you have price value. Many studies have been done on the closing price and all point toward the same thing and assume that getting a better price than the close will result in +EV bets in the long run.
In sports betting it’s sometimes hard to judge where you stand on your way to profits. Is it a matter of good fortune (or bad fortune for that matter) or are you genuinely holding an edge over the bookmaker(s)?
To answer this question a proper understanding of risk and uncertainty helps.
Risk, as first articulated by the economist Frank H. Knight in 1921, is something that you can put a price on. Say that you’ll win a poker hand unless your opponent draws to an inside straight: the chances of that happening are exactly 1 chance in 11. This is risk. It is not pleasant when you take a bad beat in poker, but at least you know the odds of it and can account for it ahead of time. In the long run, you’ll make a profit from your opponent making desperate draws with insufficient odds.
When it comes to poker, sports betting or any other game of chance your profits are almost never determined by your skills alone, but also by your opponents’ skills.
I was merely in the upper middle class of poker players and needed to be in a game with some bad ones to be a favourite to make money. Fortunately, there were plenty of these bad players – what poker players call fish – during the poker boom years.
There is a learning curve that applies to poker and to most other tasks that involve some type of prediction. The key thing about a learning curve is that it really is a curve: the progress we make at performing the task is not linear. Instead, it usually looks something like the figure below – what I call the Pareto Principle of Prediction.