Can You Use Historical Data to Improve Your Gambling?

by Michael Stevens
on May 22, 2018
12

Minute Read

Most people look at gambling strategy in the present. They calculate current odds and make decisions accordingly.

And this is the most accurate way to make gambling decisions in many cases. After all, you don’t want to worry about past results when playing games like baccarat, craps, or video poker.

But is there ever a time when past results become useful in gambling? In other words, what role does historical data play in helping you win more money?

I’m going to answer this question by discussing where historical data does and doesn’t come into play. And you may be surprised just how important past data is with regard to helping you beat certain games.

Historical Data Doesn’t Apply To Fixed Odds Casino Games

Historical data isn’t useful in most forms of gambling. This is especially the case with fixed-odds casino games.

A fixed-odds game is one where the house has a long-term advantage. Here are examples of fixed-odds games along with their house edges:

  • Video poker = 0.46% house edge (9/6 Jacks or Better)
  • Blackjack = 0.5% to 2.0% (based on tables rules & strategy)
  • Baccarat = 1.06% (banker hand bet)
  • French roulette = 1.35% (la partage or en prison rule)
  • Craps = 1.36% (don’t pass line & don’t come)
  • Pai gow poker = 1.46%
  • Online slot machines = 2.0% to 6.0% (varies based on games)
  • European roulette = 2.70%
  • Let It Ride = 3.51%
  • Online scratch cards = 5.0%
  • Caribbean stud = 5.22%
  • American roulette = 5.26%
  • Big Six = 11.11%
  • Keno = 10% to 40% (varies by casino)

Some of these games have variable house edges based on your skill and the rules involved.

Blackjack is one example because a player’s skill and the specific rules affect how likely one is to win. But unless you’re a card counter, you’re still facing a house advantage in blackjack.

Other games like roulette don’t have variable odds. Your chances of winning an even-money European roulette bet are 48.65% no matter what.

Given that the house has an advantage in these games, you can’t use historical data to win more. What happened in a previous baccarat hand or roulette spin doesn’t matter in the present.

How Players Try to Use Trend Betting to Win

One of the biggest problems that gamblers have with fixed-odds games is putting too much stock into trend betting.

Trend betting refers to using previous results to determine current wagers. Players use both winning and losing streaks to guide their betting process.

A trend bettor who believes in winning streaks will wager more when a certain result is winning more. Here’s an example:

  • You’re playing baccarat.
  • The banker hand has won three hands in a row.
  • You double your bet on the next hand because you think the streak will continue.

The other side of this is wagering against a losing streak. The logic here is that the losing streak must end soon because the odds suggest that it will.

Here’s how trend betting against losing streaks works:

  • You’re playing craps.
  • Your pass line bet has lost three times in a row.
  • You feel that you’re due to win the next wager.
  • You double your pass line bet.

This seems like a good strategy in theory. You win a pass line bet (1.41% house edge) nearly half the time, meaning that your bad luck has to reverse itself eventually.

And some players follow trend betting religiously because it makes logical sense. Casinos even feature electronic roulette boards that show the last 20 results for this fact.

But the problem with trend betting is that it falls into the gambler’s fallacy. This concept refers to how players mistakenly believe that past results can predict future outcomes.

Remember that these are fixed odds we’re dealing with. What happened in the past 20, 50, or 100 results will never change this.

The only exceptions are when somebody is playing a game with positive expected value (e.g. poker), or there’s faulty equipment.

An example of the latter is when the frets on a roulette wheel have worn down. A faulty roulette wheel can favor certain numbers (a.k.a. wheel bias), which can be determined by watching the wheel over thousands of spins.

These instances give you a chance use past data and observations to win more money. But you can’t make any money with historical data in a regular fixed-odds situation.

Sports Betting Is the Best Place to Use Historical Data

Unlike fixed-odds casino games, sports betting gives skilled gamblers a realistic chance to win profits. Anybody who can consistently win enough to cover the house juice (a.k.a. vig) can win long term.

Becoming a winning sports bettor sounds easy in theory. If you make equal point spread bets, you’d win profits with a 52.5% win rate or higher.

This is just enough to overcome the average 10% vig on point spreads and end up with a profit.

But sportsbooks are great at setting lines to draw equal action on both sides. This means that the average bettor will win 50% of their bets, but lose money overall when juice is taken from the losing side.

The hope is that you can handicap games well enough to where you find value. And consistently finding this value more than other bettors leads to profits.

The next dilemma becomes gaining enough of an edge to make a sizable income from your skill. You have two ways of doing this:

  • Make big bets that capitalize on your edge.
  • Make a larger volume of wagers.

The first point is risky if you have a small or medium-sized bankroll. Preferably, you won’t risk any more than 1% or 2% of your bankroll on a single wager.

If you can afford to bet big, then handicapping individual games can generate a lot of money. This is especially the case as you begin approaching a 54-55% win rate, which few bettors are able to do consistently.

The second method of capitalizing on your sports betting skills is more feasible. You can place lots of bets to earn more on your edge.

The drawback is that you won’t have time to accurately handicap every single contest. But the solution is to develop a system that you can use across a broad range of games.

Of course, creating a winning gambling system is easier said than done. You have no idea if your strategy will truly win enough to produce profits.

This is where backtesting historical data can help you determine the profitability of any sports betting system.

What Is Back Testing in Sports Betting?

Backtesting involves using relevant historical data to test a sports gambling system. The data must fit the parameters of the system you’ve chosen to be effective.

The idea is to use the historical data to measure if your sports betting strategy is a winner or loser. A larger sample size gives you more confidence in the results of your backtest.

Testing against 200-500 contests gives you a good idea on whether your strategy will be successful. But only having 25-50 games makes it tougher to confidently determine if your system is a winner.

Ideally, you’ll find a system that wins well over the designated profitability mark. For example, a strategy that wins 53.5% of point spread wagers is a keeper.

In contrast, you want to dump any system that doesn’t win enough to be profitable. Don’t try convincing yourself that a losing strategy can win if it doesn’t pass the test.

Creating a Sports Betting System and Back Testing It

Making a sports betting system is a wide-open matter. You can use any amount of variables to create a strategy that has the potential to win.

But keep in mind that betting strategies are harder to test when you add more variables to the matter. You can usually develop a quality system with 3-6 variables.

Here’s a sample NBA system with different variables:

  • Home favorites at +3.5 or higher on the spread.
  • First game of their homestand.
  • The home favorite lost their last game by at least 5 points or more.

The NBA season consists of 1,230 games. If you tested your system against games with these parameters, you’d have nearly 3,700 games to comb through for three seasons’ worth of data.

This is why it’s good to look for a database program that will help you backtest. You can also search Google or Bing for sports betting software that has specific back-testing features.

One thing to be aware of is that most sports betting systems will ultimately be losers. This means you’ll have to backtest multiple strategies before finding a good one.

Examples of Sports Bettors Who’ve Used Historical Data to Win

The idea of testing several sports betting strategies and failing to produce a winner sounds intimidating. But the risk is worth the reward if you find one that sportsbooks don’t know about.

Again, sports betting sites don’t like sharps ruining their lines with huge bets that often win. And they’re good at eventually identifying winners who use systems.

This creates a game of cat-and-mouse between professional gamblers and sportsbooks. Developing a revolutionary system can bring you profits for a while, at least until bookmakers catch on.

Here are a couple publicized instances where bettors created strategies that hauled in profits.

University of Tokyo Creates System with 8.5% ROI

Lisandro Kaunitz and his University of Tokyo colleagues studied 10 years’ worth of historical data on soccer (football) matches from 2005 to 2015. Their goal was to find the optimal distance from the average odds (2:1) to see what would yield the highest return.

They found that 5:1 odds were the most profitable for the soccer matches they studied. The researchers then back-tested their system to find that it offered a 3.5% return — much better than the 3.32% loss that comes with making random bets.

The team took their strategy further by creating an online tool that applied their betting system to upcoming matches. They contacted each other when the program spotted a favorable opportunity.

Kaunitz and his colleagues placed $50 bets on 30 matches per week. They earned a profit of $957.50 over a period of five months.

This is no great profit by professional sports betting standards. But the University Tokyo researchers had more academic interest in the project, rather than a desire to get rich.

The $957.50 represented a return on investment (ROI) of 8.5%, which is the type of win rate that bettors dream of. The team could have wagered more to take advantage of the situation.

But their experiment was cut short when their accounts were limited. The online sportsbook slashed their max bet down to $1.25 after a series of small wins.

“This can be for a number of reasons,” a William Hill spokesman commented,“including bonus abuse and taking proportionately more than their fair share of special offers and enhanced prices, which are designed for the many rather than a few.”

Kaunitz didn’t become rich from his team’s experiment nor did they try to. But the experiment does show that backtesting and diligence can produce a high win rate.

Haralabos Voulgaris Wins Big on NBA Betting

Haralabos “Bob” Voulgaris’ success with sports betting came when he took advantage of the way halftime totals were set in the early 2000s. Voulgaris noticed that sportsbooks had the first and second-half lines set relatively equal.

He then dove into halftime data to figure out that second-half scores tend to be higher. This is due to the fourth quarter, which features more free throws and the losing team rushing to score more points in the waning minutes.

Voulgaris made a fortune off second-half totals before sportsbooks finally caught on to his system. He eventually took heavy losses in the 2004 season, when bookmakers countered his totals strategy.

The Greek-Canadian bettor has since developed other systems to help him win more money. He earned big profits after learning the coaching tendencies of Eddie Jordan, JerrySloan, and Byron Scott.

Voulgaris also created an advanced system in 2007 with the help of a math prodigy. This again earned him untold profits until sportsbooks adjusted to his sharp money.

Voulgaris owes much of his sports betting success to his early ability to spot historical trends in halftime wagers and bet accordingly.

Historical Data Can Also Help You Win in Online Poker

Sports betting is the top way to use historical data to become a bigger winner. But you can also this data to some degree in online poker.

Programs called Heads-Up Displays (HUDs) offer helpful statistics on both your play and that of opponents. HUDs draw from hand histories to create useful stats that you can use to figure out other players.

More internet poker players use HUDs than sports bettors use backtesting and custom systems. Nevertheless, you can still use HUD info against opponents who don’t have these programs.

The two most important stats to understand include voluntarily put money into the pot (VP$IP) and pre-flop raise frequency (PFR).

VP$IP refers to the percentage of pots where a player risks money through calls, bets, or raises. PFR is the percentage of hands where a player raises before the flop.

You can use these stats in combination to get a read on each player’s style. A high VP$IP figure combined with a low PFR number indicates that an opponent is weak-passive.

Such an opponent is likely to “limp” into a lot of pots, meaning they only call the minimum bet. Their low PFR figure indicates that they’ll fold to an aggressive raise as soon as they don’t hit their hand.

In contrast, a low VP$IP and high PFR can indicate a tight-aggressive (TAG) player. TAGs prefer to wait for quality hands and play them aggressively.

Whether the info provided by HUDs is considered historical data is a debatable matter. I do consider this to be the case when discussing HUDs that provide hand data on opponents whom you’ve never even played against.

Conclusion

Historical data doesn’t apply to many forms of gambling. The reason why is because historical results do nothing for you in fixed-odds games.

But it does apply directly to sports betting. You can develop your own betting system and backtest it using results from previous contests.

Of course, backtesting alone doesn’t guarantee that you’ll win any money. You need to choose the right system using enough variables so that a sportsbook doesn’t catch on immediately.

Your chosen betting strategy, of course, needs to be a winner too. This is a process that’ll likely involve testing many systems before you find one that beats the historical data.

In a way, this data also applies to sports betting. You can use HUDs to gain stats on your opponents’ playing history.

Considering that not every player uses a HUD, you can take advantage of these programs wherever they’re allowed.

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