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What returns can I expect from a value betting strategy?

 

This will vary according to how big an edge you feel you are able to generate, and what a volume of bets you are able to put on at that edge, however to help put things into context, we'll start with a simple example. Suppose you have a biased coin that you know lands on heads 55% of the time, and tails 45% of the time, however your friend does not know this, therefore is willing to give you even money (2.00 in decimals - our preferred measure of odds throughout this site).

If you had one single bet for £1 with your friend, you would still lose that bet 45% of the time. However, if you had 100 bets for £1, you would expect to win 55 times, and lose 45 times, and therefore win £10. Your edge here is 10%, because for every bet you make, you expect to make 10% return on your money invested each time. For example, 100 x £1 bets, you'd expect to win 55 of the bets (ie £55) and lose 45 bets (ie £45), and therefore your net return is £10 on £100 bets, ie 10%.

An important concept to understand in value betting is that you will not win every bet. You do not expect to. There will be statistical variances, however so long as you continue to place bets with an edge, and do not use all of your bankroll, then you can make a significant positive return. Bankrolls and staking are discussed next, however below is an example of the returns you can expect to generate based on the edge you have, versus the number of bets you are able to place at that edge, if each bet is being placed at 2.5% of your bankroll (more on this later).

So, if you have as little as a 5% edge, but are able to place 200 bets, then assuming each bet is 2.5% of bankroll, then your expected return is 25%. This may not seem astronomical, however compared to returns achieved in something like the financial markets (7% per year in the FTSE - when the economy hadn't collapsed), it suddenly seems more interesting. If you have £10k to spare, a value bettor can make £2.5k per year based on these assumptions (you'd be betting £250 each time). You shift your edge to 10% and you place 200 bets, and suddenly you have a 50% return.

 

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