The Elo rating system, initially designed to evaluate the skill levels of chess players, has been adapted to various sports and is now widely used in football to compare team performance. By using this method, it is possible to identify value bets by calculating the probabilities of match outcomes.

How to Find Value Bets in the Champions League

Originally invented by Arpad Elo, a master-level chess player and physics professor of Hungarian origin, the Elo rating system was developed as an improved method for evaluating chess players. This system allows for comparing the skill levels of competitors in one-on-one games.

Since then, this method has been adapted to various sports and is now widely used to assess the performance of football teams. Here's how Elo ratings work, with examples from upcoming Champions League matches.

The Theory

When applying the Elo system to football, each team has a rating at any given time, and the higher the rating, the stronger the team is considered. The ratings are continually recalculated to include the results of matches between rated teams.

The essence of Elo ratings is that the winner takes points from the losing team. The number of points at stake for each match depends on the difference between the teams' ratings.

When a highly rated team wins against a lower-rated team, only a few points will be deducted from the losing team. However, if the lower-rated team pulls off an upset, a proportionally larger number of points will be transferred. In the case of a draw, the points are split equally.

Basic Calculations

Here’s how the basic calculation looks for the Atletico Madrid vs. LOSC Lille match, which will be played on Wednesday, October 23, 2024, as part of the regular season of the Champions League. Both teams are in the top 30, with 1819 and 1781 points, respectively, according to ClubElo rankings.

By calculating 5% of their respective ratings, Atletico Madrid will risk 91 points and LOSC Lille 89 points, so the total pot for this match is 180 points. Here are the three possible outcomes:

   Atletico Madrid wins (odds of 1.50): Their points increase by 89 to 1910, and LOSC Lille’s rating decreases to 1692.

   LOSC Lille wins (odds of 6.48): Their rating increases by 91 to 1872, and Atletico Madrid’s rating decreases to 1728.

   Draw (odds of 4.27): The total pot (180) is divided equally between the two teams, with 90 points each. LOSC Lille’s rating increases to 1871, and Atletico Madrid’s rating goes to 1909.

Considering Other Factors

The above calculations illustrate the basic mechanics behind Elo values in football. However, anyone with a basic understanding of football would guess that there is a significant problem: crucial factors such as home advantage are not considered.

In the above example, it’s clear that a 1-1 draw between the two teams in Madrid is a better result for the French team than for the Spanish team, considering that Atletico Madrid is playing at home. Therefore, it’s irrational for Atletico to be slightly penalized at full-time. For this reason, the calculation of Elo values in football is usually adjusted to include major factors such as home advantage, goal difference, two-leg matches, etc.

Using Elo Ratings in Betting

The main limitation bettors should keep in mind when referring to Elo ratings is that Elo calculations are based exclusively on past performance. Since they do not consider individual player performance, it can be argued that the Elo system loses some of its predictive power in certain circumstances (e.g., injuries, changes in managers/players, tactics, etc.). Elo only responds to such changes over time.

Despite this, the Elo system is widely used by experienced bettors as a reliable tool in the search for value bets, i.e., bets with a positive expected value, because it provides a solid statistical basis for calculating the probabilities of different outcomes with great accuracy. This is especially true when a competition progresses to its later stages, such as the Champions League round of 16, as the weaker teams have been eliminated, making it increasingly difficult to predict the winners.

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