The following is an excerpt from the new book The Logic of Sports Betting by Ed Miller and Matthew Davidow. You can read another excerpt here.
Before I get into the weeds there’s one more core market concept you have to understand. I started the book making a big deal about how sports betting isn’t a one- or two-player game, but rather a competitive, multiplayer game.
While you are betting directly against a sportsbook, and they are your most important adversary in this game, you are indirectly also competing against hundreds of other serious bettors trying to do the same thing you are — ﬁnd good bets. This mob of other bettors will have a consistent and predictable effect on the lines you see — they bet the good ones (and move the lines) and leave the bad ones.
The mob effect doesn’t stop after you make a bet. It keeps going, over time slowly squeezing more and more value out of available markets.
If you do bet a major market—an MLB moneyline or college football point spread or NBA total — you can expect the line to keep moving after your bet. (I say “if” you bet a major market because, again, the core of the strategy in this book will be to avoid these major markets and try to ﬁnd bets in related, derivative and prop markets with less picked-through prices.)
This line movement after you bet isn’t random. It reﬂects something of a consensus of all the serious bettors in the same market.
Sports betting consensus
Let’s say it’s a Tuesday evening in June, and a market maker sportsbook has just posted moneyline markets for tomorrow’s MLB games. Because you don’t value either your time or sanity, you have been madly clicking refresh trying to get the very ﬁrst bets in on the virgin markets.
You ﬁnd a bet you like — Reds +138 — and slam in your $100 before anyone else can grab it. The market maker moves the line to +132, and you don’t like that bet as much, so you close your laptop to go binge watch Gilmore Girls.
The next morning, you grab ten of your smartest friends and tell them about your bet. For simplicity, let’s say one of two things can happen. First, is all ten of them can tell you what a great bet you made. Second, they can all tell you it’s a terrible bet and that you should be ashamed of yourself.
Guess what. With just this information, I can already give you a pretty good guess at whether your bet was good — i.e., that you will tend to win on average over time if you make other bets that are just as good. I don’t know anything about the Reds, don’t even know who they’re playing, don’t know who is pitching, none of it.
The bet where your ten friends said you were a genius is a good bet. The bet where they all said you’re an idiot is not.
Making sense of the betting market
How is this good enough? How is it enough for me just to know what ten of your friends think without knowing anything else about the bet?
You’re betting into a hold. The presumption with no other information has to be that all bets are bad right? How does ten friends liking the bet overcome that?
Well, it’s important in this story that you’re betting into a virgin line. That is, the only person whose opinion is in the price you bet is whoever made the opening line. Those opinions are often — not the best. Despite the hold, it’s not at all rare to ﬁnd good bets into the opening line like this.
There’s no strong bias from the picked over effect built into the bet like there would be if you waited until a few minutes before game time to bet. It’s entirely plausible you found a good bet.
Because it’s entirely plausible you found a good bet, I’m willing to trust the unanimous opinion of ten independent smart people. That’s basically it. You think you found something good. You found it in a situation where ﬁnding something good isn’t particularly hard to do. Ten people agreed. It’s probably good.
Likewise, if your ten friends think you messed up, you probably did.
It’s much less clear-cut if I consider situations where say six friends like the bet and four don’t. So let’s not.
Feedback from sports bettors
This is the basic idea behind the extremely important concepts of market agreement and market resistance.
In sports betting markets, the people giving you feedback about your bet aren’t your friends. They’re other serious bettors looking for bets in the same market.
The easiest gauge of market agreement and resistance is what happens to the line at market maker books after you make your bet. The morning after your Reds +138 bet you wake up with that Gilmore Girls glow and open your laptop back up to check current prices on your bet. Let’s say you see prices between Reds +115 and Reds +120 as the widely available numbers.
Remember we’re supposed to immediately convert these to break-even percentages, so let’s do that. Your bet +138 is 42% break-even. The +120 is 45.5% and +115 is 46.5%.
After you “bought” your bet at 42, the price went up overnight to between 45.5 and 46.5. A very good sign.
This means that your “friends,” the other folks out there who bet MLB seriously, tended to agree more than disagree with your bet. They predominantly made similar bets and moved the price on the Reds substantially higher. The only bad news here is that your choice to pass on betting again at Reds +132 may have been a mistake.
What happens if you made a bad bet
No doubt you know what’s coming next, but I have to say it anyway.
Now let’s say instead of seeing the price at Reds +120 or Reds +115, you open your laptop and see prices between Reds +163 and Reds +170 out there. Those are break-even prices of 38% and 37%. You bought your bet at 42 and now it’s going for between 37 and 38.
Your friends, the other MLB bettors, think you laid a fat one on this bet and that you should be ashamed of yourself.
Some people look at this turn of events as an opportunity. “Well, if I liked Reds at 42, I should really, really like it at the current price of 37 or 38.” And then they go load up on “cheap” Reds.
No. No. No.
- NO. NO. NO. NO.
When the price moves lower on a bet you’ve made, that is market resistance. That’s smart people telling you that you made a mistake.
Listen to them.
If you don’t listen to them, what will happen is you will consistently build up your largest positions on your worst bets. You don’t get 17 cracks at the good bets. You only get that on your stinkers.
It’s not a sign that the world has temporarily gone insane. It is absolutely not a sign that Christmas is coming early this year.
It means that whatever process you used to decide that Reds +138 was a good bet was wrong. Maybe it’s a good process in 90% of games, but in this particular game something special is going on that makes the process bad. Or maybe it’s just a total garbage process that produces bad bets right and left.
Figuring out why your bet was bad
Either way market resistance is a massive red ﬂag that you’re missing something, and the best thing you can do is stop betting into the resistance and instead try to ﬁgure out what you may have gotten wrong.
Usually you don’t want to start doing the post-mortem on your bad bets until the market closes. It’s possible that the line will move back toward your way of looking at things in the run up to game time. There are many reasons a line can move one way at ﬁrst and then move the other way later.
A common way to judge whether in general you are ﬁnding good bets in major markets is by looking at your closing line value (CLV). You are looking at the price you got on your bet and comparing it to the price available at market maker books when the market closed and the game started.
If in general you are getting a substantially better price on your bets than what’s available at closing, that’s good. It means that you are usually getting market agreement.
If it’s a mixed bag, that’s a bad sign. It means that you are probably not “right” with your bets often enough to overcome the sportsbook’s hold.
For most people, getting substantial, good average CLV on bets over a period (at least hundreds of bets) is a strong indicator that those bets (and the process behind them) will win over time. Failing to get substantial, good average CLV on bets is a strong indicator that your bets will lose over time.
What your “smart friends,” the other serious bettors, think of your bets is indeed a very strong predictor of long-term success.
Exceptions to the rule
There are some exceptions to this rule about CLV, most of which involve being an end boss of one sort or another in a market. For most people reading this book, however, the following will be true.
You want to see market agreement on most of the bets you make into any major market (point spread, moneyline, total, ﬁrst half markets). The more market agreement, the better. Any time you get substantial market resistance, that’s a big red ﬂag. Stop betting. Look further into the situation and try to ﬁgure out why other smart people think you’re nuts.
If you look at all the bets you’ve made, and you have an average closing line value of at least half the hold, you’re probably on the right track. For example, if you’ve bet into a market with a 4% hold, and you bet it at 42% break-even and it closed at 45% break-even, then it moved 3% in your favor, which is more than half the hold.
That’s good. One bet isn’t remotely enough sample to draw a conclusion though. Once you’ve made hundreds of bets, and you average the CLV for all your bets and you get more than half the hold, that’s promising.
Finally, this concept of market agreement and resistance, while extremely important, applies only when there’s a true, liquid market. That is, when there’s a market maker who is actively taking bets on both sides.
If you make an NFL point spread bet on Tuesday, and the market on that bet closes on Sunday exactly where you bet it, that’s a bad sign for you. But that’s a bad sign only because NFL point spreads are an extremely liquid market made by market maker books. Between Tuesday and Sunday, thousands of smart and often well-bankrolled people looked at your bet and shrugged their shoulders.
If you make a bet on total rushing attempts by the backup running back on the Jets at retail book XYZ on Friday, and it closes on Sunday with the line unchanged, that means little to nothing. It’s possible not a single other serious bettor even looked at that bet you made. It’s also possible a few others did see it, found the same bet you did, blasted it like you did, but XYZ has a policy not to move their lines on action. (Yes, this is a policy some retail sportsbooks have.)
Market agreement and resistance is the difference between winning and losing. But only on bets where there’s actually a market.