The essence of understanding how bookmakers work is understanding where to place a bet. Most novice punters make this mistake because they don’t understand how bookmakers work.
Bookmakers make a profit by pricing their betting markets so that the odds offered do not represent the statistical probability of the event.
For example, betting on a coin toss statistically represents a 50/50 chance (2.0 in decimal odds) on either outcome – heads or tails. You bet $10 to win $10, making this a 100% market.
Bookmakers create markets that go above 100% to create an edge, which is where the bookmaker makes its money.
For the coin toss, bookmakers would offer heads or tails at odds below 2.0, meaning you would have to bet more to win $10. If the odds were offered at 1.91, you would have to bet $11 to make $10, and the market percent is 104.7%. Therefore the bookmaker’s margin is 4.7%.