Fixed odds betting has been around for a long time, and for many of us the first introduction to betting was in horse racing – ( well it was for me anyway!). Odds were quoted as 2/1 or 3/1 for a horse to win a particular race, often called a win single, the simplest of all bets. The odds reflect what the bookmaker thinks are the chance of the horse winning. Now, one important point before we go on, odds and probability are often confused by novice and inexperienced traders, and most seem to think they are the same thing. They are not, they are closely related of course, but they are different. Probability is the chance that something will happen or not, and has a range between 0% and 100%. Odds however are used to express a ratio between the probability of an event happening or not happening. If we take the simplest example of tossing a coin, we know that the chance of a head or tail is exactly 50% as there are only two possible outcomes, so we have a 1 in 2 chance of choosing correctly. If we express this as odds we get 1/1 which is known as even money.

If we go back to our example of the horse at 3/1, to convert this to relative probability, we turn the odds upside down, add one to the bottom, and multiply by 100 to convert to a percentage. The probability for us to win is  therefore ( 1/(3+1) *100 %) which is 25%. In other words, if the race were run four times under identical conditions, the horse would be expected to win once. If we decided to back the horse with a £5 bet, then if the horse wins the race, we would win £15 ( 3 x £5) plus our stake back, so we would receive a total of £20. Now the important thing to note, although it’s an obvious point, is that once you have placed your bet, there is nothing else you can do – you either win, or lose. This is the essence of fixed odds betting – there are only two outcomes to the bet. Finally, one other point – at the time of writing all profits in the UK are tax free, but please check in your own country for detailed information on local tax laws.

In principle, odds are expressed in three different ways, depending on where you are in the world. These are fractional odds, decimal odds, and money line odds.