Tipster Tactics: Decoding Betting Markets, Sharp Bookies, and the Pyramid of Profit

You don't have to be a math genius to conclude that the majority of bettors are losing money in the long run. This is why we would consider that most of the bettors are amateurs or recreational bettors. Some customers might not care about their losses as they have enough funds to view it just as a form of entertainment, without really worrying about losing the money. A very small percentage of bettors are professionals who actually make money from betting—some rely on it as their primary income, while others consider it a lucrative secondary source of income.

How to find valuable odds?

So, how do those 'smart' bettors make money? Simply put, they seek value in probability estimations and, in the long run, outperform the prices set by the bookmaker. There are, of course, other forms and methods to achieve long-term success, but value betting stands out as the most efficient approach, utilizing a deep understanding of probabilities and statistics to outperform the set prices. Many tipsters complain that it has become much harder to find value in today's market, and that bookmakers have become more efficient at setting the odds.

Smarter bookies

It is very difficult to determine whether the bookmakers have improved in estimating probabilities or not. The most apparent strategy, some might believe, to increase profits and reduce payouts would be to set larger margins. But looking back in time, we can see that instead of increasing the margins, they are actually getting slimmer—far slimmer when compared to the odds of 10 years ago.

Even with the slimmer margins set by the bookmakers it will not guarantee the bettor to make some profits. Even with slimmer margins, the bookmakers' task is to ensure that the odds are lower or, at the very least, equal to the fair value, but not higher. The only way to render the odds inefficient is to have the bookmaker's probability estimation completely incorrect. To maintain efficient odds with a slim margin, the bookmaker must possess a substantial amount of information to make a corrected estimation of the probability.

Money decides

All the information a market needs is inherent in the money itself. The money determines the market's position. This approach will also result in the most efficient market if it allows the market to determine itself based on the stakes and positions placed. Bookmakers that dynamically adjust odds based on demand, commonly known as sharp bookies, such as Pinnacle or Sbobet, will be more efficient even with significantly smaller margins.

Having smaller margins will attract regular customers to place their bets with the sharp bookie, but will they make money just because the odds are higher than what the soft bookies offer? It might reduce losses in the long term, but will it generate more profit? Probably not. As we mentioned, the estimations of sharp bookies are much more accurate, and even if they don't impose large margins on the fair value, they will not provide an advantage against them.

Opening prices

The opening prices will certainly hold more value for the bettor than the closing prices, and the market will adjust the odds as stakes are gradually placed on the outcomes. So, the biggest mistakes will be found in the early pricing and become more accurate with time and more stakes wagered (more information).

Those customers who are early odds hunters will most probably find better value, and they will be used by sharp bookies as indicators of how to adjust the odds. This is why sharp bookies do not mind having profitable customers in their customer list, as long as the number of casual punters is way higher than the smart customers, and their losses exceed the winnings of the smart bettors.

Tipsters pyramid

If you look at it as a pyramid, at the bottom, you have all those casual bettors who are losing their bets. In the middle, you have those who are barely breaking even, and at the very top, a small percentage of punters who are really making some profit. A sharp bookie will use the top of the pyramid for their risk management and as a market indicator for setting the odds. This is why these kinds of bookies welcome winning players. So, basically, the bottom of the pyramid consists of those bettors who are funding the very top of the bettors.

A friend of mine recently asked me how betting companies always know how to set odds, but for a casual bettor like him, it seems challenging to grasp the overall picture. That's why casual bettors might feel that it's becoming increasingly difficult to find value in the odds. As the pyramid becomes sharper with new, smarter customers having larger banks, the odds will also sharpen. Even with slim margins and prices very close to the fair value, it may seem impossible for a casual bettor at the bottom of the pyramid to find any value.