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 Bookmakers Explained

For a bookie to make a living they must be able to evaluate the true odds of an event. This means understanding, experience and having good sound calculation ability. If a bookie is unable to do this the smart gamblers will pick on him until he changes or fails completely.

Having worked out just how likely the possible results are, say for instance horses winning a particular race, the bookie will then take a few points from every horse's odds. Further more if there are any horses fancied for sentimental reasons then they will have their odds shortened still further.

Example Horse Race
Horse True Odds Shortened Odds Sentiment Odds
#1 2-1 7-4 7-4
#2 3-1 5-2 5-2
#3 4-1 7-2 3-1
#4 6-1 11-2 9-2
#5 20-1 16-1 16-1
#6 50-1 33-1 25-1
Bookie edge % -0.7% +11.4% +17.8%

The hope of the bookie is to get money bet on all the horses so that which ever horse wins, the amount paid out is less than the total of money bet on all the horses. If this happens then the bookmaker will be guaranteed a profit no matter what happens. This situation of evenly distributed betting does not occur often but if the bookmaker continually takes bets on horses at lower odds than the true ones, then a profit is almost inevitable.

The key thing for a bookmaker is never to take on a large liability on a particular result such that if that thing happens they will be unable to pay out. To take on such a liability would be akin to gambling against the result. Big bookmakers resolve all of these problems by having hundreds or thousands of shops taking small bets that even out the book.
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