Following the money - do market moves help bettors?

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As you improve your knowledge of markets, betting tactics and your ability to assess the value in odds on sportsbooks and exchanges you can increase your capacity to make wise choices as a punter or trader.

If you have a good understanding of how to read when the sharp money is coming into a market and whether it is affecting early price movements or late price fluctuations, then you are already on the right track.

Are you in-the-know when it comes to spotting trends on Asian markets and therefore able to make a profit in that sphere, in addition to UK or European based sportsbooks and exchanges?

In this guide, we will walk through these topics and we will also consider how and why sportsbooks move prices. We will also explore the methods behind early changes in prices movements, late price movements and recording this activity so we can become familiar with which teams and players the big money favours in specific countries and markets.

Finally, we will examine price changes as percentages in order to understand how they demonstrate how big a fluctuation in odds really is – whilst also considering the flow of money required to produce specific moves. 


When does the ‘sharp’ money come?

Sharp money can move in the market and cause price fluctuations at any time, but there are often clear trends to early and late movements in price. The so-called sharp money refers to the often large stakes placed by bettors whose opinion is acknowledged and respected by the bookmaker, who then adjusts the odds. 

Those individuals or syndicates behind the smart money essentially assist the sportsbook in setting the right odds on the possible outcomes of an event. These people may be professional gamblers and they are essentially playing a constant game with the bookmaker, placing large wagers as investments when they see value in a price.

Knowing how to follow the sharp money in a market can be extremely beneficial. Can you spot the patterns set by the sharp money and read when a bookmaker is about to, or already has moved the odds accordingly? Can you play this to your advantage and apply that knowledge on an exchange to make more money? Can you become a sharp money mover? The answer may be yes in each case. 

In contrast to the ‘in-the-know’ movers behind the sharp money are recreational sports bettors who we may refer to as novice punters. For this crowd, betting is simply a leisure activity to add further excitement to watching a horse race or big football match. The odds are stacked against them on the sportsbook and bookmakers make money primarily from these customers.

They might place their bets hurriedly at their own convenience, overly rely on gut instinct, have no real concept of the value in the odds and no clue about the fluctuations in price which offer significant opportunity.

Sharp bettors, meanwhile, combine hard work, years of research and expertise and diligent study of price fluctuations to stand a much better chance of making money off the sportsbook. Or they are the smartest and sharpest traders on exchanges, who have sophisticated trading models and know how to take maximum advantage of early or late changes in odds on specific markets. 

They only bet big when they know they have the edge of over the bookmaker or rival traders. To them, a win rate of 53% over a year-long period may be considered a success.

Both bookmakers and sharp bettors will watch the betting in the Asian markets where the volume of wagers and trades is higher and odds often fluctuate at a faster rate than in Europe for example.


Sharp money vs public sentiment

Prices can also be driven up or down by public sentiment or a belief that a team is destined for glory. For example, the odds on offer from UK bookmakers for England to win the semi-final against Croatia at the 2018 World Cup would probably not have offered great value. With lots of hopeful England fans backing England to win the bookmakers would have to shorten their odds, to offset their potential losses. The sharp money might already be backing a Croatia win or a draw after 90 minutes.

With England scoring early via Kieran Trippier the hype continues to build. After 60 minutes the sharp money is laying the England win on the betting exchanges. Croatia equalise in the 68th minute and the ‘final’ result at 90 minutes is a draw, meaning the England win bet has already lost. Mario Mandžukić scores an extra-time winner for the Croatians causing heartbreak for the English fans, many of whom are also out of pocket having bet on their country to win at not great odds.

The sharp money has Croatia to qualify for the final from the early betting at good odds and made more profit by placing smart wagers last minute during the game as the prices for various markets changed.

So to put this slightly differently, following the smart money is about thinking through where the money will flow, how this unbalances prices on sportsbooks and exchanges, how/when prices are adjusted to reflect these flows of money and knowing how/when to react to those early or late price changes. 

Knowing how to follow the sharp money requires some knowledge of how sportsbooks calculate their odds and set their prices. Sportsbooks do not set out to receive an equal amount of bets on each eventuality of a game. They know that novice punters spend unwisely betting on favourites and that’s partly where the profit lies. They offer as favourable a price as they can to entice the crowd to place more wagers.

So 75% of all the bets on a match might be on the ‘favoured’ team to win, with lower odds than the true value of the bet, even whilst the bookmaker pushes to the limit to attract as many punters as possible. However, 25% of the bets have been placed on a draw or the underdog to win at higher value odds, with the smart money on this side of the line and with significant cash wagered by these bettors.

25% of the bettors may be wagering much more than 25% of the overall amount staked. Again the bookmaker has to adjust the price, so then some of the smart money may go back on the favourite as the value of backing them to win then increases. These fluctuations are constant as they are key to the amount of profit the bookmaker can yield (and therefore also key to how much the sharp money movers are also making).

You can keep an eye out for these price fluctuations by keeping spreadsheets of how prices change on specific markets before and during games. You may spot big changes in price even when there has been no openly publicised news (such as injuries, suspensions, unexpected line-ups) and this might be the result of ‘steam moves’ where betting syndicates pounce in unison and prompt sportsbook odds to adjust. They are looking to force value on one side of the wager or the other and if you are ready to strike you may also become a beneficiary of their market moves.

It’s also wise to think about movements in odds in terms of their associated implied probability. A shift from 20/1 (4.8% implied probability) to 10/1 (9.1% implied probability) is a shift of 4.3% in the implied probability behind the odds. At first glance, a change in odds from 20/1 to 10/1 might therefore seem like a bigger fluctuation than 7/4 to 5/4 for example.

However, the drop in value from 7/4 (36.4% implied probability) to 5/4 (44.4% implied probability) is more significant. This movement in the odds reflects an 8% change in the implied probability of the price.

Take into consideration the sharp money that may be behind forcing these price changes. Is there big money forcing a fluctuation where the updated implied probability offers far more or less value when the real probability of the outcome (say a horse winning a race) has not drastically changed.

Consider also that the amount of interest in a race will also play a big part in how odds fluctuate before it gets underway. So, 7/4 to 5/4 in a high profile Cheltenham festival race is a far more significant alteration than a typical Catterick handicap where a price drops from 20/1 into 14/1. 

The variability of the implied probability of the price changes compared with what may be far less real change in the chances of the horse winning the race is what you want to keep in mind. The horses’ chances of winning may have remained the same in both cases, but a huge bet from a group of smart money bettors has altered the odds on the Cheltenham selection, despite the strength and depth of the market in that case. Spotting these trends and reacting to them will move you into the sharp money.

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