I recently contributed an answer to the Trademate Sports ‘Industry Experts’ blog series for the question: how can I determine whether betting results were based on luck or skill?
It’s a very important question. So in this post I elaborate on my answer and provide further reading.
Luck or Skill? — 5 Key Questions To Ask
1. Do I Have A Large Enough Sample Size?
Anyone can get lucky from a few bets. But generating a profit over a large set of bets, over a long time period, can only be achieved with skill. The more results you have, the more clarity and accuracy you have in verifying profitability. Collect as many data points as possible.
My post on the importance of sample size in betting demonstrates (an extreme example) of just how much the tide can turn. In the case study, a Betfair strategy made an exceptionally positive start, holding a +5.77% ROI with over 2,000 bets placed. Eventually, after 17,000 bets, the yield turned negative settling at -0.63%. It was a losing strategy.
Some winning streaks are nothing but pure chance; there was never any edge to start with. Other streaks are merely “temporary” opportunities that existed, but closed up over time (most likely the situation in my example strategy). Then there’s the meaningful streaks which represent a profitable, sound strategy. But you need to collect enough data to be absolutely sure of what you’re dealing with.
2. How Does My Strategy Perform On Level Stakes?
As you begin to analyse past data you’ll find it surprisingly easy to make a betting strategy appear profitable by raising/lowering the stakes under certain conditions. But that doesn’t mean your strategy is actually profitable.
Remember: a selection system that doesn’t produce a profit on a level stake basis won’t profit under any staking plan.
So if disproportionately sized bets are the only reason you’re in the green (or red), then you need to nullify their impact from your analysis to be sure of your performance. Assume all stakes in your sample are equally sized. If your results are positive and steady, then that suggests skill rather than luck.
There are two types of level-risk staking plans:
- You risk the same amount per bet, irrespective of the odds. So if the odds are 2.5 or 10.0, you’d still bet the same amount. For Lay bets you’d have to calculate the correct risk (the liability) per bet.
- You determine the risk from the odds. This method accounts for the implied chance of winning. Higher stakes are placed on low odds, and lower stakes at high odds. The result is an even profit from any win, no matter what the odds were.
Over time, the end result is more or less the same for both (1) and (2).
Learn more about staking plans from my post about betting bankroll management.
3. Does My Strategy Have A ‘Reason’ Behind It?
It’s important to have some idea why your strategy does, or doesn’t, work. If you’ve identified a pattern that appears to produce great results, then try to work out how and why that’s happened. Find out precisely where the edge (if any) comes from. This will enable you to separate good fortune from skill going forward.
So where might your edge come from?
- Inside information: if you’re a dodgy geezer and have ways of obtaining highly valuable inside information about a sport, then that would give you an advantage (and make you a criminal at the same time).
- Obscure findings: if you’ve discovered a trend (backed up by a sufficient data set) that’s vastly overlooked by the majority of the market, then that might be the reason for your advantage. This approach has a higher chance of success in less popular, under-developed sports and markets.
- Speed: being faster than others means you’ll have first dibs on value odds before they move, or disappear entirely. This is precisely how a lot of sports traders secure their advantage.
- Capitalism: it’s possible to base your strategy entirely around the errors of bookmakers and other bettors. Typically, this would involve picking off pricing errors — where the odds are too good to be true.
Every winning strategy has an edge of some kind. The simplest way to gain an edge is to use the Trademate Sports value bet finder.
4. Is Variance Impacting My Results?
In sport, the seemingly impossible outcome occasionally happens. So if, for example, your data set includes a rare 1000/1 winner then that’s going to somewhat distort your figures. And it goes the other way, too — you can lose a 1.01 bet that you labelled a “dead cert”.
For a ‘typical’ picture of performance, eliminate extremes from your analysis. I recommend capping the odds (e.g. <= 20.00), so that good fortune plays less of a part in your results. Without against-the-odds wins bloating the PnL, only skill could possibly prevail in the long-run.
Despite variance in your performance, over time your ROI % will converge to where it really belongs. Consider a casino with a fixed house edge on Roulette. The house doesn’t always win on every spin — it goes through peaks and troughs. But over time their % advantage reveals itself in their profits. It’s inevitable.
For further reading, check out my post: Betting Variance In Action.
5. Am I Beating The Closing Line (Start Price)?
It’s well known among professional bettors that consistently beating the closing line (or “Start Price”) yields positive results. Monitor the start prices at sharp bookmakers and betting exchanges. If you’re able to back at significantly better odds, then that’s a solid confirmation that your results weren’t just luck.
Why does beating the start price work?
Well, the start price (or “closing line”) marks the latest possible pre-event point, where the most money has been matched before going inplay. At this moment the odds incorporate all the opinions of the public — both retail and professional — from the lead up to the event. The odds are, on average, the most accurate they will ever be.
To better that start price means you’ve beaten the market. It’s profitable, and I’ve proven it in my post: how to beat the closing line.
Hopefully these 5 tips give you some idea of whether you’re onto a winner, or not. Always take the time to fully verify your betting profitability before you’re overcome with excitement; it will save you a lot of disappointment — and money.