Betting on the underdog
Find out what betting on the underdog is and strategies you can use when betting on the underdog.
Value betting is one of just three online sports betting strategies that has been proven to be effective at generating profits.
Less complicated than arbitrage and with longer term income generating potential than bet matching, value betting has been given a boost by the development of software tools that can assist you in identifying and taking advantage of value betting opportunities.
In this guide to value betting, we’ll explain what value betting is, how it works, how much money you can expect to make from value betting and simple steps you can take to get started.
What is value betting?
Value betting is a betting strategy that aims at consistently identifying and backing selections which have odds higher than they should be based on probability, also known as ‘overpriced’ selections.
Value bettors will use automated software, their knowledge of a particular sport and/or odds comparison services to identify and bet on these overpriced selections.
It is important to note that value betting is a high turnover betting strategy.
Punters need to place large numbers of value bets (typically hundreds of bets daily) to generate significant profits from value betting.
What is a value bet?
The basic principle of a value bet can be illustrated by a simple example from the world of horseracing.
A punter betting on a horse race watches the racehorses parade in the warm-up to a race and picks up subtle cues that the favourite for the race is carrying a minor injury.
This will obviously benefit the second favourite for the race, and if the bookmaker has not picked up this niggle, it is likely that the second favourite will be priced at much higher odds than it should be.
If the punter takes the odds on the second favourite before the injury to the favourite becomes apparent to the bookie, they will have placed a value bet.
How value betting works – bookmakers and probability
In a perfect world, bookmaker odds would accurately represent the true probability of any given outcome in a sports event.
However, this is not what happens in reality.
Instead, every bookmaker market and all associated odds are rigged by bookies to pay out less than they would if the odds accurately reflected probability – irrespective of which selection in the market wins. The probability of each outcome in the market occurring is exaggerated and the odds are reduced proportionally .
This is known as the overround, and it virtually guarantees that most punters will lose money on their sports betting in the long term.
Value betting vs the overround
Value betting is the practice of overturning the bookmaker’s advantage in selected markets and instead giving a punter an edge.
This is done by consistently identifying opportunities in betting markets where a bookmaker has overpriced a selection and is effectively underestimating the probability of that selection winning.
If a punter can string together enough bets where bookies have overpriced selections, they will effectively bake a guaranteed profit into their betting, flipping the script on the bookmakers.
How the overround and value betting work
A coin toss can be used to demonstrate how the overround and value betting can both affect long term profits and losses.
A coin toss involving a perfectly balanced coin has a 50% probability of landing on either heads or tails.
If we were to use probability to accurately assign decimal odds to a coin toss it would be as follows:
- Heads: 2.0
- Tails: 2.0
A punter placing 100 successive $1 bets on Heads would be expected to break even at the end of the process, as half their bets would lose, and the other half would win.
However, any bookmaker offering a coin toss market would want to make sure that they generated a profit from all this betting activity.
They could therefore add a 10% overround to the market by exaggerating the probability of each outcome and in turn lowering the odds on offer for each outcome:
- Heads: 1.82 (55% probability)
- Tails: 1.82 (55% probability)
As you can see, by exaggerating the probability of either outcome, the bookie lowers the odds on both heads and tails, and in doing so reduces how much money they will pay out on any winning bets.
While the true odds of landing heads or tails remains 2.0, the bookie has now ensured they will pay out just 0.82 in profit on each winning bet rather than the $1 they would be due for if they paid out at true odds.
As a result, a punter placing 100 bets on Heads, half of which lost, would end up with net winnings of $41 on the winning bets, and losing $50 on the losing bets for an overall loss of $9. This is the overround in action – a guaranteed long-term profit for the bookie and a guaranteed long-term loss for the punter.
Now, to give you an idea of how value betting can benefit the punter in this scenario – imagine that the punter was aware that the coin used for the coin toss was weighted on the Tails side and that the probability of the coin landing Heads up was in fact closer to 75%.
In this case the actual probability of winning a Heads bet would be closer to 1.33, which means the bookie’s offer of 1.82 is overpriced and inaccurate, creating an opportunity for a value bet at that price.
If the punter placed 100 bets on Heads at odds of 1.82, 75 of which won, he’d win a net amount $61,5 on his winning bets and lose $25 on his losing bets to score a net profit of $36,5.
Expected value and value betting
The term expected value is used to describe the expected profitability of a bet as part of a value betting strategy. For value betting to pay off, the expected value on a bet needs to be over 0%.
Using the example of the loaded coin toss above, we can calculate the expected value in this case using the following formula:
(Real odds in % x Decimal odds at the bookmaker) -100
Plugging in the figures from the loaded coin toss we get: (75 x 1.82) -100 = 36,5%
Which coincides with the calculated profit of 100 bets on Tails for the loaded coin.
How to find value bets
Understanding how value bets can generate long term profits won’t help you much if you can’t consistently identify individual value bets in the first place.
There are three basic methods for finding value bets.
Sports expertise
Expertise in a specific sport can be used to identify value bets. If you know more about a sport or sports event than a bookie you will have the ability to identify mistakes in the odds markets when bookies make them.
For example, if you passionately follow second division club rugby in Wales it is unlikely that a bookmaker’s knowledge will match your own, or that they will be able to price events in odd markets without making the odd mistake which you could identify.
In fact, this is how many modestly successful punters leverage value bets without even knowing that they are doing so. They know their sport well enough to be able to identify genuine betting opportunities and mistakes by bookies when they come up, thereby improving their profit margins from winning bets.
While sports expertise can help you identify value bets, it is by far the most difficult approach to value betting.
For a start you will need to know your sport extremely well for this to be effective. Even then it will be very difficult, if not impossible, to identify hundreds of value bets a day.
Odds comparison services
An easier way to identify value betting opportunities is to make use of odds comparison services, particularly ones that feature odds from bookies that typically offer odds that are closer to true probability. This would include fixed odds bookies like Pinnacle or betting exchanges like Betfair.
If you can rely on a couple of odds comparison services to accurately benchmark what the price on a selection should be, it is possible to identify bookmakers where odds on that selection are overpriced.
For example, if the favourite in a horse race is trading at 2/1 at Pinnacle and around 11/5 at other bookmakers, with just one bookie offering the horse at a price of 3/1, it is highly likely that the latter bookie has overpriced the horse, providing a value betting opportunity.
Value betting software
Even if you can spot value bets through your knowledge of a particular sport or an ability to spot errors on odds comparison services, value betting software is going to be the quickest and most effective way to identify value bets.
This is due to the sheer volume of value bets you will need to place every day to make value betting profitable. A software service like Rebel Betting can identify a large number of value bets every day, saving you time and providing greater accuracy in spotting value bets.
Our calculator is based directly off of the calculator found on the Rebel Betting website. It assumes a per bet size of 1% of the initial investment, 3% profit per bet and the ability to place 80 bets per hour.
Staking methods
There are two approaches to handling how much you should stake on each bet. Both staking methods carry some risk and some rewards.
Flat rate betting
Flat betting or level betting is when you stake the same amount on every bet.
A stake that is 4% – 5% of the starting bankroll is a common starting point for flat betting. For example, a $20 flat stake off a $1000 starting bankroll. However, you can make your flat stake much lower to reduce the risk of losing your bankroll using flat rate betting. The more stake units you have in your bankroll, the less you will have riding on each bet, which will reduce your risk but also your profitability.
The advantage of flat rate betting is that calculating your stake is straightforward. More importantly, using flat stakes means you will on average recover from losses more quickly than you would using a percentage stake method.
A disadvantage of flat stakes betting is that your profits will tend to increase in a linear way, as you will not automatically use the growth of your bankroll to increase bet size and profitability. Your average turnover will also be lower than other bet types due to the conservative nature of this approach.
Flat rate betting is recommended if you don’t know the expected value of your bets and you are placing bets within a narrow range of odds.
The Kelly Criterion
The Kelly Criterion is a percentage stakes method that sets your bet according to the size of your current bankroll and/or by referring the expected value of a bet.
The latter is important, because Kelly betting recognizes that the expected value on some bets is higher than on others, and to get the most value out of these bets the stake should be adjusted accordingly.
Despite its complexity, the Kelly method is popular because it promises the highest profitability of any stakes method, which will tend to increase exponentially as your number of bets increases. In theory, Kelly betting should also reduce your risk of complete bankruptcy to zero. However, it can still deplete your bankroll to the point where you prefer to stop and cut your losses.
A disadvantage of the Kelly method is that calculating the Kelly value or the expected value of a bet manually can quickly get too complicated for the average punter. Fortunately value betting software like Rebel Betting allows you to easily set a Kelly value that applies to all your bets. This allows you to benefit from this approach without needing an advanced understanding of mathematics.
Another disadvantage of the Kelly method is that it can take longer to recover from bankroll losses due to the way your bets will be scaled down when your bankroll is shrinking.
Kelly betting is recommended where you are able to quickly calculate the expected value of each bet and are placing your bets at lower odds.
How to do value betting
By now you should have a reasonable idea what value betting is and how it works. The next step is to put this into practice and to start using a value betting strategy.
Here are the simple steps you will need to take to start value betting.
1. Open a bookmaker account
You will need a bookmaker account to place value bets. The more bookie accounts you have the better, as a high level of activity in a single account that results in ongoing profits is likely to eventually result in your account being restricted in some way.
Furthermore, the more bookie accounts you have, the greater the number of value bets you will have access to.
2. Determine your bankroll
You will need a reasonable bankroll to get started with value betting and will be turning this bankroll over up to several times a day.
To calculate the size of your bankroll you will need to decide what kind of returns you want from value betting and how much work you want to put into finding and placing value bets every day.
For example, if you want to average between $200 and $250 a day in profit you will need to turn over $5000 every day with a return of between 4-5% (a reasonable expected return on fixed odds value bets).
As with any form of betting, do not bankroll more than you can afford to lose. While value betting is relatively low risk, there is still a possibility that a sustained losing streak can deplete your entire bankroll.
Expert value betting websites like Rebel Betting recommend starting off with a modest bankroll of around $500 to learn the ropes.
3. Identify value bets
We recommend using value betting software to find bets purely because it accelerates the process of identifying value bets and reduces the scope for human error.
Rebel Betting is the industry leader in value betting software, and provides numerous helpful tools to help you identify value bets and optimize your bankroll usage. They currently offer a 14-day free trial (no credit card required) which you can get here.
4. Place your bets
Once you have identified your value bets, you will need to visit the bookmaker offering the value bet and place your bet. At this stage you should already have figured out what staking method you will be using to choose your stake amounts.
5. Try live betting
The more frequently you turn over your bankroll in value betting, the more money you will make in profits.
If you focus on fixed odds markets, you’ll immediately run into the problem of tying up your bankroll in events that need to deliver a result to pay out, which will slow you down.
An alternative option is to use live betting markets to place your value bets.
This has two advantages:
- You bet will be settled as soon as the conditions for the live bet are met, which means you will have more liquidity from your bankroll throughout the day.
- Bookies tend to make more mistakes when pricing live betting markets, which translates into a higher ROI from value bets placed in live betting markets, which can approach 10%.
However, there are some challenges to placing live bets too, as odds can fluctuate very quickly, making it harder to identify and quickly pin down live value bets.
5. Be prepared for losing streaks
Value bets can and will lose, and you may even experience runs of losing bets that last for several days or even a couple of weeks. It is important to note that over the long-term profitability margins will apply and you will experience winning streaks that will push your account back into profitable territory.
6. Don’t chase your losses
If you go on a losing streak do not abandon your method for finding value bets and start impulsively putting larger stakes behind bets you haven’t thought through properly.
Value betting FAQ
Can you make a living from value betting?
It is possible to generate significant profits from value betting. However, being able to quit your job to do value betting won’t work out. This is not because value betting stops working after a while, but because bookmakers have algorithms that automatically detect, and restrict winning betting accounts. Simply put, if you win too much for too long, bookmakers WILL restrict your account. Whether this takes place in a few days, weeks or months is impossible to predict, but you have to bank on the fact that at some point you’ll be restricted.
Can you make money value betting?
Yes, you can make money value betting. As long as you can find a bookmaker that makes mistakes with its odds and does not restrict your account for being profitable you can use value betting to generate a profit.
How does value work in betting?
The ‘value’ in value betting is the difference between the true odds of a selection winning an event and any higher odds offered by a bookmaker.
For example, if the true odds on a horse winning a race were 3.0 and the bookie priced the horse at 4.0, then the value offered by the bookie odds would be 50% (or: (Real odds in % * Decimal odds at the bookmaker) -100).
Taking odds of 3.0 at the bookie is therefore a value bet.
If you can tie enough value bets together in a string of bets, the value of these bets will increase the chances that you make an overall profit from your winning bets.
How to find value betting software?
There are a number of options available for value betting software. These range from free online calculators that help you calculate the value on individual bets through to value betting simulators. However, what you really need if you are going to be attempting value betting is a service that scans live bookmaker odds and highlights value betting opportunities. Rebel Betting is the clear leader in this department, and our recommendation for the best value betting software. Other services include OddsJam, BetBurger, Trademate Sports, Breaking Bet and BetonValue.
Is value betting risk-free?
No, unlike arbitrage value betting is not entirely risk free. While long term profits are guaranteed on a long enough timeline, there is a risk that a losing streak during value betting will deplete your bankroll and leave you stranded before a winning streak pushes you back into profitability. The risk of this can be reduced by keeping your stakes on your value bets low, so that you never a significant portion of your bankroll riding on a small number of bets.
What does EV mean in betting?
In sports betting EV or ‘expected value’ is the amount a punter can expect to win or lose if placing a bet on the same odds repeatedly.
Does positive EV betting work
Positive EV betting, also known as EV+ betting or value betting, does work. It does so by negating the overround bookies build into their odds markets and instead giving the player an edge in their betting over the long-term.
How much can you make value betting
The amount of money you can make while value betting depends on the size of your bankroll and how long a bookie will allow your account to operate before restricting it. In some cases, you may be able to generate daily profits of 5% on a $2000 bankroll for years, and in other cases the bookie might shut you down after a few weeks for betting and winning far less.
How do you win a value bet?
Value bets are won the same way as regular bets – the selection you make wins in the event. Where value bets differ is that winning individual bets is not important, what is instead important is being able to place a large number of bets with a positive expected value, which will iron out your losses and generate an overall long-term profit.
What is the most profitable betting strategy: matched betting, arbing or value betting
Assuming you can operate your betting account for several months or years and have a decent sized bankroll, value betting is the most profitable betting strategy. Match betting is a good way to generate short term profits but will stop generating profits when you run out free bet offers from new bookie accounts. Like bet matching arbitrage (or arbing) is a zero-risk betting strategy. However, it is much easier for bookies to identify arbing than it is for them to identify value betting, and arbing also offers a lower overall ROI, which means you operate at higher risk for lower reward.
Should I use a tipster to help me identify value bets?
The simple answer is NO. For a start the majority of tipsters do not make long term profits from sports betting. If you follow them for a sustained period of time you will find that they make a long-term loss.
And that is because most tipsters do not focus on identifying value bets, they focus on identifying winning bets irrespective of whether or not the odds on the bet actually offer full value on the bet.
Winning bets at unfavourable odds is how you lose money in the long run in sports betting. What you instead need is to consistently identify bets with a positive expected value. Place enough bets at a positive expected value and you should make a profit in the long-term.
My value bet lost, did I do something wrong?
No, you can expect individual value bets to lose frequently. A value bet is by its definition a good bet, whether it wins or loses. What is more important than winning individual bets in value betting is ensuring that you consistently place good bets, so that you don’t constantly have the bookie overround shaving away at your profit margin when your bets do win. This simple trick is enough to make sports betting profitable!
