# How odds work? Betting odds explained

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If you are new to sports betting, whether at the online bookmakers or at the local betting shop, chances are the first thing you will need more information about is how the odds work. The betting odds are the first thing one sees at the bookmakers and, believe it or not, is one of the main deterrents to people not to bet on sports. For many people the columns of betting odds just seem intimidating and they believe that some kind of special knowledge is required before you can tackle all this math. As we are about to show you, betting odds are very easy to explain.

__Betting odds explained__ - the odds in general are nothing
more than arbitrary indication of the probability of an event to happen.
Here one must make a clear distinction between “odds” and the actual
“betting odds”, as they are different. The betting odds work by helping
the bookmaker find a middle ground between the bettors, i.e. the bookie
acts as a market maker and the odds are the tool used to make this
market. We highly recommend you read our article about
how
the bookmakers work, in order to understand this difference, As we
explained there, the job of a bookie is to have equal money on both
sides of the bet. The **betting odds are nothing more than the
incentive for the punters to take one side of the bet or the other**,
it has nothing to do with the actual probabilities of the event
occurring (or not), although they are related. To help you understand,
let's look at a simple example. Let's not talk about sports for a
second, but take two playing cards, one red and one black. You can mix
them up and flip one, the chance that card would be “red” is 1:2, i.e.
the odds of a card being red is one out of two times. These are the odds
of the card being red. Now, the betting odds are totally different. A
bookmaker can offer 4.00 (4/1) betting odds on the card being red, this
doesn't mean that the actual odds of the card being red have changed,
rather than the bookie has changed the betting odds in order to have
more people bet on red. This will be the case if there are a lot of
money pouring in on black and not enough on red. By changing the betting
odds so, the bookmaker gives the bettors incentive to bet on red, rather
than black, since the payout is better.

__How odds work__ (betting odds) - This is where the second
function of the betting odds come – **calculating the payout of a bet**.
The payout of a wager is calculated as per the betting odds offered by
the bookmaker. If a bookie offers 1.20 odds on Manchester United to win
their next match, if a punter wagers £10 and wins the bet, the bookie
will pay back £12 (£10x1.20). The correlation of the betting odds to the
payout is the actual incentive offered by the bookmakers in order to
steer people to one side of the bet or the other, all while trying to
maintain equilibrium of the money wagered on each side of the bet (to
happen or not to happen). Let's look at another example to illustrate
how the betting odds differ from the actual odds of probability. Let's
say that United is playing Barca in a Champions League final game and
most people agree that Barca have a better chance of winning, although
not by much. So the bookie will post odds 1.10 on Barca to win and 1.35
on Manchester United. But if all of a sudden more money come in on
United, instead of Barcelona, the bookmaker must change the betting odds
in order to get the money bet on United and the money bet on Barca to be
the same amount (or as close as possible). If a lot of bets come on
United to win, even though the actual odds of probability favor Barca,
the bookie could go as far as changing the odds to make United the
favourite, let's say betting odds on United will change to 1.15 and
those on Barcelona to 1.20; in this case most people will start betting
on Braca to win, bringing in more money on the Barcelona's side of the
bet, exactly what the bookie wanted. As you can see the odds remain the
same, i.e. Barca favourite to win, but the betting odds have changed in
favour of United.

So in a nutshell, you can look at the betting odds as “how much will the bet pay if winner”, rather than the chances of the bet being the winner. The betting odds work by offering incentives to the punters to select one outcome over the other and they do so by using the inherent relation – the payout calculation. When betting an event, the best way to approach it is by first making up your mind about the outcome probabilities (real odds) and then checking the bookmaker and see what the payout will be (betting odds). Whichever payout is best for your expectations – take that bet.

__Calculating your payout using the betting odds__ – As we
already mentioned, the odds offered by the bookmakers show how much you
would get paid if your bet is a winner. You can calculate your payout in
certain way, depending on the type of odds you use:

*Decimal Odds*: As the name suggest, the odds take a
decimal form, for example, 1.35 are decimal odds. They are the most
popular way to display odds all over the world. The simplest form of
betting odds, one calculates the payout by simply multiplying the odds
by the amount of money wagered. If you placed a £10 bet on 2.35 decimal
odds, your payout will be £10x2.35=£23.50

*Fractional Odds*: These odds are very popular in the UK
betting market, although not so much so in the rest of the world, with
the exception of horse racing. An example of fractional odds is 5/1 and
is pronounced “five to one” and not “five divided by one” or “five over
one”, etc. Calculating the payouts is not very hard, however. The first
fraction shows the amount you would get paid as related to the second
one. Using the 5/1 fractional odds, it simply means that the bookmaker
will pay you five for every one wagered. If you bet £5 on 5/1 odds, you
will get back £25 (5x£5=£25). On the other side, if you bet £1 on 9/4
odds you'd get £2.25 back – the odds show that the bookie will pay £9
for every £4 wagered, so you can calculate the payout of these
fractional odds as (9/4)x£1=£2.25

*American Odds*: As the name implies, these are the type
of betting odds most popular in the United States. They take the form of
a number with a plus or minus sign in front of that number, examples
being -110 and +210. The number with the minus sign shows the favourite
bet and is calculated as “how much you have to bet to win one hundred”.
For example, the -110 shows that you will have to bet $110 to win $100.
In decimal odds this converts to roughly 1.90 odds (-100 odds is called
even money, i.e. 2.00 in decimal odds or doubling your money; you won't
see “even” much, because of the spread in odds or “juice”.). The odds
with the plus sign in front of the number, on the other side, shows “how
much you will win if you bet one hundred”. Using the previous example,
+210 means you will win $210 for ever $100 bet on those odds, or 3.10
when converted to decimal. American odds are very hard to calculate,
especially with parlay bets, as you can certainly see, so we advise you
to either use decimal odds (all online bookmakers have the option to
display the odds the way you want it) or use our
odds
converter calculator.