In the intricate world of NHL betting, understanding the concept of probability is paramount. While many bettors are familiar with implied probability, which is derived from the odds set by bookmakers, there’s another equally important concept to grasp: true probability. Let’s dive deep into understanding what true probability is and why it’s crucial for NHL bettors. Learn how to calculate true probability and then true odds, or the vig-free line.
What is True Probability?
True probability represents the actual likelihood of an event occurring, without any external influences like bookmaker margins (vigorish or vig) or public perception. It’s the most accurate representation of an event’s chance of happening, based purely on statistical and factual data.
How is True Probability Different from Implied Probability?
- Source of Derivation:
- Implied Probability: Derived from the odds set by bookmakers. It includes the bookmaker’s margin and can be influenced by factors like public sentiment.
- True Probability: Derived from a comprehensive analysis of all relevant factors, such as team performance, player stats, historical data, and more. It’s devoid of any external influences.
- Accuracy:
- Implied Probability: Might not always represent the actual likelihood of an event due to the inclusion of the bookmaker’s margin.
- True Probability: Aims to be the most accurate representation of an event’s likelihood.
Why is True Probability Important in NHL Betting?
- Finding Value: By comparing the true probability with the implied probability, bettors can identify value bets. If the true probability of an event is higher than the implied probability, there’s potential value.
- Making Informed Decisions: Bets based on true probability are more informed, as they rely on comprehensive data analysis rather than just the odds set by bookmakers.
- Risk Management: Understanding the true probability helps bettors assess the risk associated with a particular bet, aiding in better bankroll management.
- Avoiding Public Bias: True probability isn’t influenced by public sentiment, which can sometimes skew the odds. By focusing on true probability, bettors can avoid falling into the trap of public bias.
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How to Determine True Probability and True Odds in NHL Betting
In NHL betting, understanding the concept of true probability and true odds is crucial for making informed decisions. While implied probability gives you an insight based on the bookmaker’s odds, true probability and true odds provide a clearer, unbiased picture. Let’s delve into how you can calculate these using implied probabilities.
What are True Probability and True Odds?
- True Probability: Represents the actual likelihood of an event occurring, devoid of any bookmaker margin or external influences.
- True Odds: These are the odds derived from the true probability, representing a vig-free line.
Step-by-Step Guide to Calculate True Probability and True Odds
1. Start By converting the bookmaker’s odds into implied probability:
- For Positive Odds (underdogs): Implied Probability= 100/(American Odds+100)
- For Negative Odds (favorites): Implied Probability=American Odds/(American Odds +100)
Let’s use Montreal Canadiens -120, Toronto Maple Leafs +110 for our example.
For positive odds (underdogs) Implied Probability= 100/(American Odds+100)
Implied Probability Leafs=100/(110+100)
Implied Probability Leafs = 100/210
Implied Probability Leafs= .4762 or 47.62%
For Negative Odds (favorites): Implied Probability=American Odds/(American Odds +100)
Implied Probability Canadiens=120/(120+100)
Implied Probability Canadiens=120/220
Implied Probability Canadiens= .5455 or 54.55%
2. Calculate the Market Overround:
Sum the implied probabilities of all possible outcomes. In a two-way market, like a Moneyline bet in NHL, you’ll have two implied probabilities.
Overround=implied probability Team A+Implied Probability Team B
Overround= 47.62+54.55
Overround= 102.17
3. Normalize the Implied Probabilities:
To get the true probability, divide each implied probability by the overround.
True Probability=Implied Probability/Overround
True Probability Leafs=47.62/102.17
True Probability Leafs= .4661 or 46.61%
True Probability Canadiens= 54.55/102.17
True Probability Canadiens= .5339 or 53.39%
The sum of the true probabilities must always equal 100%!
4. Convert the True Probability to Odds
For outcomes with a true probability over 50% (favorites and Canadiens in our example):
True probability / (1 minus (true probability / 100)) * -1 to convert into a negative
53.39/(1-(53.39/100))*-1
53.39/(1-.5339)*-1
53.39/.4661*-1= -114.55
Rounding up, the True American odds for the Canadiens are -115.
For Positive Odds (underdogs):
For outcomes with a true probability under 50% (underdogs and Leafs in our example):
(100 / (true probability / 100)) – 100
(100/(46.61/100))-100
(100/(.4661)-100
100/.4661-100= 114.54
Rounding up, the True American odds for the Leafs are +115.
The true odds are the vig-free line, so if the favorite is -115, the underdog must be +115!