If you’ve done any digging up on sports investing strategies or systems, you’ve surely heard that going against the public is often a smart move. But what does this really mean, and how can a smart investor utilize the movement of public money in their systems?
Read on to find out!
Understanding the bookmakers and the casual bettors
Let’s begin by talking about a couple of key concepts before we move on to explain how public money can actually be tracked. This chapter is especially relevant for those who are new to the sports betting market.
First, a very short and simplified description of how sportsbooks actually work and operate. In theory, bookmakers aim to set their odds in a way that they get money spread evenly among both sides of a wager. The way they make their money here is by having what’s called the “juice” or the “vig” on top of each bet. This could be compared to a transaction fee of a broker in the stock market.
But getting the action to go even for each wager that’s out there is close to impossible, and bookmakers also know that there’s more profits to be made by exploiting uninformed bettors. They adjust to the tendencies of the public and over inflate the odds for popular teams and other types of popular bets.
We touched this topic in more detail and referred to some very interesting research in our article on home-team bias and its effects on the odds, so go check that out for an in depth analysis!
Second, let’s talk about why the average Joe often makes poor choices in the sports betting market. This is something we’ve also touched on multiple times in the past. Most people are acting based on intuition and emotion in the sports betting market. Oftentimes “prime time” games can also influence the amount of money placed on a single event. A Monday Night Football game will have far more money on it than a normal Sunday afternoon game because it’s nationally televised and no other games are played at the same time.
The thought process behind the majority of the money that’s being wagered is something along the lines of “I’d like for my team to win this game”, or “I hope there’ll be a lot of scoring tonight”. The typical client of a bookmaker is a sports fan who casually wagers some money to make watching a game more exciting.
To summarize, most bettors wager money casually and don’t care that much about the odds, and bookmakers exploit this by adjusting the odds in their favor for popular matchups.
Next, we’ll explain briefly how smart investors in the market can take advantage of this. In traditional investing this term would be referred to as “Institutional Money”.
Tracking the public money
To begin here, we’ll quote ourselves from that home-team bias article that we referenced earlier:
“Going against the crowd in huge games with popular players can be profitable when you follow the movements of public money and the lines. Research shows that the lower the amount of action a team gets compared to their opponent, the higher the chance of them winning the bet is. This has historically been true for football, basketball and baseball alike.”
The numbers vary depending on the sample used or the sports investment system that’s in place, and you’ll find plenty of examples of how certain conditions of public money movement have historically resulted in profits. Many of the ScoreMetrics systems in our portfolio also utilize public money conditions as a criterion for qualifying games.
Let’s explore how investors can track public money.
There are plenty of websites available where investors can see how the percentage of bets and money are currently distributed for a game for free. These sites often also present a history of line movements for games.
This data can be analyzed from two perspectives: Where the public money is (your average Joes), and where the smart money is (sports investors who are basing their decisions on thorough analysis).
Locating the public money is easy: Just focus on the percentage number of bets in the data. Let’s take an example where the Los Angeles Dodgers are playing against the Miami Marlins. You take a look at the data and notice that 75% of the number of bets have been wagered on the Dodgers.
The public is clearly putting their money down on LA here. Easy. This might also mean that the run line could be overly in favor of LA because the bookmakers want to get a lot of action for the popular team and take money in from uninformed bettors. On the other side, the line for Miami could provide a good value trade for smart investors.
Locating where the smart money is going is a little bit more difficult. But often, you can spot it in situations where the majority of the number of bets is going on one side, but the amount of money wagered per side suddenly starts evening out, or even turning on the side of the team that has received the lower number of bets.
Using our previous example where the Dodgers had 75% of the number of bets, let’s assume that the amount of money wagered had a similar ratio – 75% of the money was on LA and 25% was on Miami. But then you notice that later in the day, that ratio turns to 50%/50%, even though LA still has the same 75% of the number of bets on them.
This could be a sign of smart sports investors making a move on Miami with large sums of money.
Following the movements of public money and taking a contrarian approach is one of many techniques that successful sports investors have in their arsenal.
To get a full overview on how to build solid sports investment systems, check out our sports guru John Todora’s new book – “Zero Correlation Investing – The Score Metrics Secret”, which is currently on sale for a limited time.
The ScoreMetrics Lab is the engine that runs the Sports Trading System operation, consisting of a team of researchers and writers who are constantly testing and retesting algorithms. They work hand in hand with our Head Trader and Creator of ScoreMetrics, John Todora to help find new breakthroughs and develop new systems.