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Betting Guide: The Heuristics of Gambling

A lot of gamblers trust gut instinct to bet without realising that relying on ready made rules of thumb – known in psychology as heuristics which you will learn more about in this Betting Guide – can lead to poor decision making. Find out what the most common heuristics are and how to avoid them?

There is a very good reason we rely on heuristics – evolution. Our distant ancestors when faced with complex life-threatening problems didn’t have time to weigh up the situation, so developed quick-fire methods. Those that worked were passed down through generations, and we are still relying on them, often when we shouldn’t.

Introducing The Common Heuristics

Anchoring

Anchoring affects people’s ability to estimate the most probable number of items of a particular kind or the most probable value along a sequence.

Example: A group is asked to guess the percentage of African countries in the United Nations. Before answering they witness a random process to produce a number (the anchor), and are asked whether the percentage of African Nations is above or below that anchor. They then make their actual estimate of African countries in the United Nations. The estimates given will track the anchor, even though the participants know it is random.

Without realising it, the individuals are anchoring their estimate to a totally arbitrary point. The reason for this is thought to be because the anchor is taken as a working hypothesis, a starting point from which the individual is reluctant to move too far away from.

This phenomenon is widely exploited in marketing and is very relevant to betting. Bettors should beware anchors in bet wording, and realise how
handicaps, and spread values will influence your judgements, without you even realising.

Availability Bias

Availability bias manifests in people’s tendency to attach greater significance to events that leave the strongest impression, or are easier to recall.

Examples of this include the way people over-estimate the risk associated with dramatic and traumatic events such as a terrorist attack or earthquakes. The sale of earthquake insurance goes up immediately after earthquakes though the risk is greatly diminished, while people are prepared to pay a higher premium to insure against death from an act of terrorism than insurance against death of any kind (which would obviously include terrorism).

From a betting perspective be wary of assigning excessive significance to more recent or memorable results

From a betting perspective be wary of assigning excessive significance to more recent or memorable results. Ask yourself whether you find it easier to recall a 0-0 draw or a high-scoring game.

It’s likely to be the latter, but it doesn’t mean it is more probable. In soccer bettors tend to over-estimate the frequency of events like red-cards and corners, because they are important and easily recalled. This impacts perceived probability and betting behaviour.

It is linked to a common phenomenon of bettors favouring the Over in Totals markets, or buying on a Spread, as availability bias leads them to wrongly conclude the event concerned is more likely than in reality.

Diversification

This heuristic describes how people tend to demonstrate greater diversity when confronted with simultaneous rather than sequential choices.

Example: When asked to choose five chocolates from a selection box, with an equal number of varieties, individuals make more diverse selections than when they make five sequential choices.

With relation to betting, punters tend to invest more when the opportunity appears to be more diversified. A good example would be backing the drawand the away team based on the perception of a more diversified bet, as opposed to simply laying the home team. There isn’t, however a logical reason why you should bet more, unless the Expected Value is greater.

Escalation of Commitment or Sunk Cost

This heuristic describes how people feel compelled to justify a commitment by increasing the cumulative investment despite the potential cost going forward outweighing the potential benefit.

This is commonly described as ‘throwing good money after bad’. An example would be to sit through a film that you are not enjoying just because you have already invested time and money in watching it, and therefore determined to justify that investment.

From a betting perspective this can be seen when punters persist with a bet that has a high probability of incurring a large cost rather than taking a certain immediate, but smaller loss. People in these situations tend to display an irrational determination to justify their original decision, instead of ‘cutting their losses’.

Representativeness, or the Gamblers Fallacy

People tend to believe short sequences of random events are representative of longer ones, ignoring the fact that these events are statistically independent.

Example: The gambler’s fallacy is also known as the Monte Carlo Fallacy because in 1913 Black come up 26 times in a row on a roulette table at the Monte Carlo casino. After the fifteenth Black bettors were piling onto Red, assuming the chances of yet another Black number were becoming astronomical, thereby illustrating an irrational belief that one spin somehow influences the next.

The gambler’s fallacy is closely related to the Hot Hand Fallacy, which is the belief in streaks of good/bad luck. Where someone experience what seems like an atypical sequence of events, they infer some special significance i.e. I am on a hot streak, or my luck is out.

It has come to be known as the Hot Hand Fallacy after a study in the 1980’s suggested a basketball player who successfully makes a shot is no more likely to be successful the next time they throw just because of their initial success.

This is particularly relevant in betting for random games of chance such as roulette, lotteries and dice games.

Humans aren’t machines, we try to be rational, but our instincts often get in the way. This can be costly for gamblers, so as much as possible ignore what your gut is saying unless its time for lunch.

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Betting Guide – Reverse Line Movement

Betting Guide - Reverse Line Movement

Betting Guide – Reverse Line Movement

Monitoring line movement or Reverse Line Movement can provide a snapshot evaluation of the market and understanding why bookmakers make these adjustments can be beneficial to bettors. However, a common mistake is to base betting decisions on line movement alone. Read on to find out why.

Why do bookmakers move lines?

Bookmakers offer odds on a particular sports match in the hope of attracting an equal amount of money on both sides of the market and make a profit by applying a margin to the odds they offer. If they get uneven “action” (amount of money bet) on a game, they will most likely adjust the odds (increase one side to attract money and shorten the other make it less attractive) in an effort to balance the book and reduce their liability.

Equally important as the money (not just the number of bets) placed on each side of the market is where that money comes from. Bookmakers will pay closer attention to the bets placed by customers who are known to be very knowledgeable about what they are betting on (sometimes referred to as “sharps”) when assessing the market and deciding whether to adjust the odds or not.

It is important to realise that betting percentages are not related to the total amount of money wagered on a match, but rather the number of bets taken on each side – this betting guide will help understand the importance of this.

For instance, if a largely unsuccessful bettor who typically bets large amounts of money places a $100,000 bet on a Premier League soccer match, the bookmaker might refrain from changing the odds despite their large liability – essentially taking the risk that this bettor will be wrong.

However, if a bettor who is known to regularly beat the NFL markets has a $5,000 bet on a game, the bookmaker may decide to adjust the odds accordingly based on this information.

We already know that most bookmakers will begin to limit or close accounts of such bettors once they notice a pattern developing.

What is reverse line movement?

Reverse line movement (RLM) refers to odds movement that contradicts betting percentages in the market – this is when the majority of bets are placed on one side yet the line moves in the opposite direction.

This is why it is important to realise that betting percentages are not related to the total amount of money wagered on a match, but rather the number of bets taken on each side.

The challenge for anyone looking to benefit from using reverse line movement as part of a betting strategy is being able to determine the amount of money staked on each side of the market and which side the more knowledgeable bettors favour.

The money staked by the collective average bettors usually accounts for a significant amount of the total amount staked on any sports match, and so determining the ‘right side’ by tracking line movement alone – in either direction – is near impossible.

We can use a hypothetical example of RLM to get a clearer idea of what it looks like in practice. If a bookmaker has posted the Pittsburgh Steelers (-7) against Green Bay Packers (+7) for an NFL game, it doesn’t necessarily mean they expect the Steelers to win by seven points. This is merely a marker to try and get 50% of the bets placed on either side.

Equally important as the money (not just the number of bets) placed on each side of the market is where that money comes from.

If there was a higher percentage of bets placed on Pittsburgh (say 75%), theoretically the line would move to Pittsburgh -7.5 or higher as the bookmaker would want more bettors to bet on the Packers and thus make them a more attractive option. If there was RLM, however, Green Bay’s handicap would shorten (to +6 maybe).

Advocates of RLM would suggest the bookmaker moved their line against Pittsburgh (despite their larger liability) because the more knowledgeable bettors (or “sharps”) have bet on Green Bay. In most cases this is a highly oversimplified evaluation of what may or may not have caused this ‘unexpected’ line move.

In truth, although the bookmaker may have been influenced by the actions of certain bettors when moving the line in Green Bay’s favour, their decision would have been influenced by a whole host of other factors. One such example could be information coming to light that could influence the outcome of the game (injuries, suspensions, changes in the weather).

The pitfalls of relying on reverse line movement

Betting percentages for different markets are widely available to the public on various online platforms (and from bookmakers themselves). This data can be tracked with records made of where RLM has been ‘predictive’ of the final outcome. In other words, where the line moved in favour of the winning team despite the bet percentage being higher on the other (losing) side.

This information is often packaged and distributed to clients, for a fee, and sold as a “fool-proof” strategy that will guarantee a return on investment. However, the results provided by these “tipsters” are seldom transparent and winning percentages seem too good to be true – and usually are.

Another hurdle for bettors who may decide to subscribe to these services is that the cost of information cuts into their profit margins, which are already relatively small in sports betting in the long term. However, clients at Bet Chimps have experienced long term return on investment since 2013. You can check our results at the following:-

2017 Results
2018 Results

Why traditional handicapping is still your best bet

We know that placing bets that are solely based on line movement alone is a problematic sports betting strategy. If you’re on the same side as the bettors that influence where a line moves it will certainly be beneficial in the long run, but paying for reverse line movement alerts won’t get you there.

Using traditional handicapping methods and betting models that consider a multitude of factors is still the most proven way to beat the closing line and become a profitable sports bettor.

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Gambling is for 18+ only. If you think you have a gambling addiction, please, contact the gambling hotline on 1800 858 858

Sign Up to Bet Chimps for our Sport and Racing all inclusive memberships!

Don’t forget to subscribe to our Newsletter!