text: Bookies make obscene amounts of money every year, even though their business involves betting on sport.
  Now that’s a remarkable thought.
  Because if betting is such a mug’s game, how come their profits are so darned reliable?
  I believe there are ten reasons, and I’m pretty sure we can copy all of them.
  Let’s look at each in turn.
  1. Bookies set their own prices.
  There is a huge difference between the way ordinary punters and bookies bet.
  It is a remarkable fact that, once most punters have decided who to bet on, they usually take the best available price in the market.
  Some wise souls will think about using an odds comparison site like Oddschecker.com. Whereas many will just take the best price they can find on Betfair, or go with Betfair SP.
  But very, very few will estimate where a price might go, and what level of risk they are prepared to tolerate on their selection.
  Instead, they will often feel a compulsion to get their chosen bet on, and sit and watch the market until a bet is matched.
  An unmatched bet is not a sign of weakness! Rather, it’s a sign of price awareness.
  Only fools buy shares at any price.
  Successful traders, and bookies, buy on the dips.
  You can do the same.
  2. Bookies don’t bet at all, but trade to a balanced book.
  Bookies are actually in quite a weak position, as they can never be sure which bets punters will take.
  They do not have your absolute freedom of choice, but instead can only incentivise punters to take prices that balance out their overall exposure, by offering good value here, and poor value there.
  It follows they occasionally offer outstanding value on a given bet, simply to balance their book overall.
  This is a terribly risky way to do business, and yet they’ve mastered the art.
  One solution they’ve adopted in the horse racing world (and, to a lesser extent, with other sports) is simply to offer lousy prices in the fifteen minutes before the off.
  A huge percentage of bets are placed in the final few minutes before a horse race. Punters who are determined to get their bets on before it’s too late will suddenly take any price.
  And the bookies know it.
  So this is the one time it makes little sense to make a bet.
  So why do it?
  3. Bookies don’t pay commission (though do carry a lot of costs, and pay a lot of tax).
  Any punter will pay up to 5% commission on winning bets at the exchange, whereas of course a bookie will pay none. And this gives them a big advantage over you.
  However, this can sound suspiciously like an excuse too.
  5% isn’t that unreasonable when you think about it.
  You carry no costs, nor pay tax on winnings, but bookies do both.
  All those town-centre branches, and expensive half-time advertisements, don’t come cheap.
  And as for all the free money they insist on throwing at you… well, there aren’t many industries that are so competitive, you have to bribe people into becoming customers.
  But if you still believe commission-free betting is the future (and clearly the bookies do), your best option is to restrict your betting to bookies who:
  - don’t advertise much
  - don’t give free money away, and
  - don’t have a chain of high-street outlets.
  So that means Pinnacle Sports then.
  And they’ll never limit your account!
  4. Bookies place a lot of bets and make tiny average profits per bet.
  Bookies place bets like you and I draw breath.
  It happens 24/7.
  It’s their life blood.
  By contrast, and rather surprisingly you may think, most punters don’t bet anything like often enough.
  We therefore become significantly attached, emotionally, to individual outcomes.
  It’s understandable perhaps but, as I’m always saying, emotion is death to betting.
  Place ten bets in a day and any one bet could determine how successful you are.
  Place a hundred bets and that’s much less likely to be the case.
  Don’t like the sound of placing 100 bets in a day?
  One option is to get a bot like BetHawk to do it for you.
  Don’t like the sound of automated betting?
  I know. I felt the same way for a long time.
  But then the bookies have been using technology to set prices automatically for years.
  But before you decide (based on what, incidentally?) that your emotionally led human brain is superior to an unthinking (and critically, unfeeling) machine, have a read of my BetHawk trial conclusion.
  5. Bookies spot when they’re losing, and stop doing it.
  To paraphrase Jane Austen(!), it is a fact universally acknowledged that a wealthy punter must be in want of a bookie account.
  In short, sooner or later, they close winning accounts down.
  But my point here is to learn from the bookies.
  And the moral of the tale is: find out what works, and ditch the stuff that doesn’t.
  Bookies know they’re good at extracting cash from emotional mug punters, and hence emphasize “recreational betting”.
  Why do you think they don’t shut up about in-play betting?
  Well, because it’s a fan’s game… and fans are passionate (i.e. illogical) creatures.
  The big question of course is when to call a halt to an approach that’s been losing for a while.
  This is a short question with a long answer (again, Rollingstone addresses it), but one thing you may wish to consider is just pressing the pause button for a while.
  I’ve currently done this on my Trading Steamers thread.
  We’re still in profit, but we’ve had a wobble lately, and my emotions are getting in the way.
  When that happens, stop.
  Do something else.
  Needlework, croquet, baking.
  Come back in a couple of weeks.
  You will have a fresh perspective and know what to do.
  6. Bookies concentrate on markets they understand.
  The sheer proliferation of new markets on bookmaker websites may lead the casual observer to believe that bookies take bets on everything.
  And in theory they do.
  But in practice, they make a huge percentage of their profits from the obvious old stand-bys.
  Millions are traded on Premier League football, and specifically on a handful of markets (Match Result, Correct Score, Goals Scored, First Goalscorer).
  Win markets on UK horse racing are, likewise, a guaranteed moneyspinner.
  However, even these sports offer hundreds of markets that the bookies barely look at when they set their odds.
  A typical Premier League match will offer around 300 markets, yet only a tiny fraction of them will contribute significantly to the bookies’ bottom line.
  Tell me, if you were them, wouldn’t you concentrate on getting your Match Odds right over, say, Total Shirt Numbers?
  Can you perhaps see an opportunity here to specialise in something slightly esoteric?
  They’re all human you know, and their traders are very thinly spread across a lot of markets.
  7. Bookies play a very long game and don’t exit markets too soon.
  Bookies accept daily/weekly/monthly losses as part of the game.
  Punters rarely do.
  The impact of probability on performance is far more significant that most punters realise.
  You really have to place a lot of bets to get the noise out of the data.
  Bookies understand this and use huge betting banks to ride out the storms.
  If you’re not using them too, you really are on the wrong site.
  8. Bookies don’t trade emotionally or aim to derive pleasure from the act of betting.
  If I read another tweet from a punter who’s had a ‘cheeky tenner’ on a football match or horse race (for which, read ‘bet on a long shot who I don’t seriously think has a chance’), I may just scream.
  Forget the National.
  Forget the Lottery.
  Forget recreational, fun or cheeky bets.
  There is nothing fun about a losing bet!
  Approach it as a business.
  Aim to make less than you would normally think is worth winning.
  2% capital growth a month puts you about level with all-time great investor Warren Buffett.
  Think about that.
  9. Bookies lay off big liabilities.
  I can’t stress this one enough.
  Bookies don’t attempt to predict winners, but they do trade out of high-risk positions.
  They may of course deny that they dump huge chunks of cash into Betfair just before the off, but, from time to time, they will do it.
  The one thing bookies don’t want is to lose big, and they structure their books accordingly.
  This is one of the reasons behind the existence of the so-called favourite/longshot bias.
  Essentially what this scholarly theory states is that bookies offer truly lousy odds on longshots, and actually not-bad odds on favourites.
  Because the one thing they’re really scared of is the Foinavon effect.
  Yep, when the bookies lose, they lose on favourites. And that’s because favourites represent a hit they know they can bounce back from.
  Limiting liability is more important than winning big.
  Back to Warren Buffett, and his two golden rules of investing:
  RULE ONE – Don’t lose money.
  RULE TWO – Never forget Rule One!
  10. Bookies understand and exploit their opponent’s emotions.
  All those promotions for daft accumulators – Goliaths, Union Jacks and the rest – tell you something:
  – The bookies understand the value of compounding their pricing edge, and
  – They grasp the emotional appeal of a single, huge payout.
  No bookie ever put an advert on the wall promoting each-way doubles, which are an under-used, value construct than can deliver the sort of steady profits they don’t wish to see.
  (Incidentally, they’re so good that the profitable Winning Racing Tips service is more or less based on them!).
  Nope, your average bookie knows it’s all about emotion.
  Specifically, your negative emotions.
  Hence the single biggest profit-maker for the bookies is… punters chasing losses.
  It’s stupid, but oh so very common.
  Indeed, if there is one thing I’ve learned from running this website, it’s that human beings are irrational (myself very much included).
  Losing money can make anyone act irrationally.
  Judging from emails and comments we’ve occasionally received on my site – even in response to free services like the (very profitable!) Gary’s Lays – losing can even make people angry.
  I have written at length about this subject before, but it all boils down to the following. You must have:
  a) a betting bank you are prepared to lose entirely
  b) a portfolio of systems
  c) a recovery plan for when things go wrong (which they definitely will).
  For solutions, I refer you to:
  – my free Rollingstone PDF
  – my behavioural portfolio theory article, which in fact goes beyond the ideas proposed in Rollingstone.
  I will have more to say about behavioural portfolio theory in future, but it’s basically a way of designing a porfolio to take account of the fact you’re a human being. It’s quite brilliant.
  It’s time to be professional about it.
  No more system hopping, random/fun betting, or punting because you’re out of pocket or just plain bored.
  Serious betting shouldn’t be entertainment.
  No successful investor buys shares for a laugh!
  Create a portfolio and set modest profit targets, backed by plausible recovery plans.
  Ratcheted 2% growth each month will double your bank in 3 years!
  Whatever the economy is doing.
  Try asking your financial advisor for a hedge fund that will do that!
  So you can beat the bookies.
  Here’s to your success.