**As a bettor do you understand how luck influences your short-term betting? Is a run of five winning bets skill or luck? This article explains how assigning probabilities to your bets is a good habit to develop, as a run of winning bets isn't always a sign of good betting.**

The relationship between
bookmaker and bettor is based around the odds priced up by the former, and the
opinion of the latter regarding the accuracy of that calculation.

The most readily used example is
a fair coin toss. The expectation that either a head or tail will result from a
single toss is equal, with an implied probability of 0.5, and if this
expectation were to be converted to decimal odds, the fair price for a head or
tail would be 2.0.

Of course, a bookmaker intent on
making profit would price this market up at shorter odds than 2.0 to ensure
that any bet made would, in the long term, be favourable to the book. A price
of 1.87 on both would have an implied probability of 0.535 for each of the two possible
outcomes.

The margin - for such a
simple market is derived from the sum of the implied probabilities. In the case
of the example above, this would be 1.07 and the margin would typically be
quoted as 7%.

The larger the margin, the easier
task the bookmaker has to ensure their prices are not longer than the true
chance of an event happening, which would present a long term value opportunity
for the bettor.

Therefore, a bookmaker who
consistently applies low margins to their markets, should be the preferred
bookmaker, as they are more likely to present value betting opportunities in
sporting markets, where, unlike a coin toss, the odds are influenced by
numerous variables.

**How likely is a run of profitable bets?**

If betting with a low margin book
is the first step to a profitable approach, the most visible sign that a series
of bets have passed the value test, is a profitable yield.

However, bettors should look at
how likely it is that a run of bets will produce a profit or loss based on the
implied true probabilities.

If we again use the artificial
example of a series of coin tosses, where we are certain of the true
probability, we can calculate the likelihood that a particular run of bets will
be profitable or not.

The outcome of ten such true even
money bets can range from ten consecutive losing bets all the way through to a
full house of winners.

It is more likely that the
outcome of ten such trials will include a mix of successful and unsuccessful
wagers and the most likely outcome is an even split of wins and losses. In
simulations or by the use of a binomial calculator, this particular
outcome has a probability of occurring nearly 0.25.

The outcome of each trial is
independent of the previous outcome and the bookmaker will use the margin to
offer an unfavourable price for each toss.

If, for example the price for
each outcome was set at 1.87 - a margin of 7% - five successes from 10 bets
would produce a return of 9.35 units if 1 unit level stakes were wagered on
each of the ten bets.

Overall, a yield of 0.65 units
lost from the ten units staked.

**How the margin affects your returns**

We can use this simple example to
illustrate the importance of understanding the effect the bookmaker’s margin
has on returns. If each event had been priced at 1.95, the margin would have
only been 2.5% compared to the previous 7% and although a loss would still have
been made from only picking five winners from ten bets, this loss would have
fallen from 0.65 units to 0.25.

To make a profit from such a
series of poor value wagers, six or more successes are required. And again
either by simulations or with the online calculator there is just under a 0.21
probability that exactly six wins fall in ten trials, and a yield of 1.22 units
are made at 1.87 or 1.7 units at the more generous price of 1.95.

Of course, seven wins and greater
will also produce a positive return from these ten bets and the cumulative
probability for each number of wins of six or greater totals nearly 0.38.

Therefore, because of how we have
set up this artificial scenario, we know that each individual wager is priced
to represent poor value for the bettor. Yet there is not an insignificant
chance that six or more wins will occur in ten bets and a profit will be made.

**Keep records to identify the difference between luck & skill**

Real life betting sequences will
involve a variety of prices and stakes, but the key to a successful approach
will include identifying prices, which may not fully reflect your estimation of
the actual chances of an outcome occurring.

Therefore, keeping a record of
your estimation of the true probability of your bet being successful, alongside
the implied probability from the bookmaker’s odds, is a good habit to develop.

Not only can you compare the two
values, but it also allows for relatively simple spreadsheet based simulations,
along the lines of the coin toss scenario, to be created to examine the part in
which luck and skill may have played in the short term to your current yield.

A knowledgeable bettor will often
think in probabilistic terms, not only for individual outcomes, but also in the
profit or loss scenario from a sequence of such bets.