What is risk intelligence?
Risk intelligence is the ability to make accurate probability estimates. A simple test can measure this, repeated with results analyzed. Back in the 1960s, two American psychologists studied a group of gamblers over a four-year period, men who were avid racetrack enthusiasts. None of the men earned their living by gambling, but attended races nearly every day in order to gamble. The study found that some of the men in the test group were significantly better at estimating the chance that a given horse would win a particular race, this is also known as handicapping.
What the psychologists were trying to figure out is, if there is a fundamental cognitive ability that allowed certain individuals to gamble successfully, or if they had developed the skill to estimate probabilities accurately over time. This became ‘risk intelligence’.
Passing the test
First, you need a set of predictions. For instance in horseracing, predictions revolve around which horse will win a given race. Once the probabilities are listed for varying outcomes: horse A will win, horse B will place second or horse B will win, and horse A will place second, etc. these can be assigned a percentage. In other words, what is the chance in percentage that a given horse will win?
This is performed best in percentages in multiples of ten, i.e. 0%, 10%, 20%, and so on. Once you have the results, the horses win/lose can be placed in designated groups. For example, horses that have a 10% chance of winning, 20%, and so on. Then the process is repeated, using the data you have collected from the previous race. This method is of course simplified, but is the basis of creating effective risk intelligence.
The keys behind risk intelligence
The study also went past the realm of gambling, and tried to determine for instance, why weather forecasters are so much better than the doctors are at estimating probabilities. There are several factors involved to explain weather forecasters’ success.
Firstly, weather forecasters have a repetitive task with minor degrees in variability or in nonprofessional terms, things to predict, such as rain and temperature.
Secondly, weather forecasters have a lot more data to go on with fewer degrees of uncertainty when compared to doctors. In terms of actual percentages, developing an accurate long-term system and the ability to predict whether an event is “more likely” to happen boils down to data accumulated.
Thirdly, the feedback for weather forecasters defined clearly and received quickly, whereas for doctors it is not always the case. For instance, a patient may not come back or a diagnosis may become prolonged with uncertain outcomes in the weeks ahead to be confirmed. Rapid feedback is key, in other words, the amount of time passed between the prediction and the outcome, and this is most important particularly when it comes to gambling.
These three factors will not only help determine, but improve one’s risk intelligence: repetition, sufficient data, and timely feedback, thus becoming the key ingredients for successful gambling.
How risk intelligence helps in gambling
When it comes to estimating probabilities, particularly if you play for real money, risk intelligence is a determining factor. For instance, when a bookmaker offers a gambler 5:1 odds for a certain outcome, this means that probability of said outcome is 20% or less. In other words, the odds are high to the gambler, so it would not be a smart bet to make, unless the outcome is greater.
However, in reality, the chance of winning could be 25%-30%. In gambling terms, this is known as overlay, where the listed odds are actually in greater favor to the player than the house. If a player has good risk intelligence, they will have a greater advantage against not only the bookmaker, but also other bettors.
Knowledge is power, and although bookies tend to have several advantages over bettors, based on collecting more information to evaluate the odds, their expertise tends to wear thin. Bettors, on the other hand can use their focus on a single event, game or sport, in order to build a better model for their given field.
Software tools should not be underestimated either. Such devices can be an invaluable method in determining risk factors, whether for poker, slots machines, video poker machines, blackjack, and other such popular casino games.
Software tools and computers can calculate odds with more efficiency and speed than players can without running the risk of human error. Many such tools are available online free with a quick inquiry via search engine. Always customize your risk analysis software for the event on which you choose to bet.
Developing effective bankroll management also cannot be underestimated, and below we’ve listed the best bankroll management tips and tricks in association with risk intelligence.
Play at your limits
Once you have established your gambling budget, setting a loss limit cannot be overstated. Gambling professionals will be the first to tell you, the key to successful gambling longevity is to realize that it is a marathon and not a sprint. Never commit more than 10-20 percent of their entire bankroll to any individual game. If you have $100 in your pocket, bet no more than $20 on your target. If you lose, it’s time to switch.
Calculate your win percentage
Calculating a win percentage for a given period time is critical for risk intelligence, especially in the realm of sports betting and casino gambling. Keep a record of your win-loss ratio, let’s say for the week. This will give you a good indication on what games favor you, and which ones do not. Objectively, you need to observe your win-loss ratio in order to catch yourself when you make mistakes. Improving your abilities as a gambler takes discipline, and this factor is definitely one that needs close attention.
Use varying strategies when sports betting
There are various betting strategies when it comes to betting, and perhaps the most famous example is the Kelly strategy in sports betting. This formula helps determine what percentage of your bankroll you should wager for each event to maximize profit. It refers to:
- Multiplying the odds of an event with the probability of winning.
2. Subtracting the probability of losing from the number obtained in part one.
3. Taking the number obtained in part two and dividing by the odds.
Probability x Odds -1 = Overlay
Let’s say that Team G is playing Team F. Team G has odds at 2.70 to win, with a probability assessed at a 40% likelihood. To calculate the overlay, you use the formula:
Overlay = (0.40 x 2.70) – 1)
= (1.08) – 1)
This means Team G has an 8% value on your bet. So, how much of your bankroll should stake on a bet with an 8% value? Use the following:
Overlay / (Odds – 1), which is 0.08 / (2.70 – 1) = 0.0471
With a bankroll of $1,000, the Kelly Strategy tells you to bet 4.71 % of $1,000 = $47.10.
There you have it! This is a crucial part of risk intelligence when determining how much of your bankroll you should wager for a given match to minimize loss and maximize profit.
Beware of overconfidence
The biggest obstacle of developing efficient risk intelligence is, without a doubt, overconfidence. Successful gambling is more of a science than just luck. Just ask any gambling professional. Sure, you can have fun gambling, and get lucky, but in terms of intelligent gambling, risk assessment and longevity, it behooves a player not to be overly confident in their abilities.
To quote psychologist Scott Plous, “No problems in judgment and decision making can be potentially catastrophic.” When it comes to gambling, there is no such thing as a “sure thing”. In other words, the odds are never 100% in your favor due to the plethora of variables involved. However, there are many things that players can do to achieve as close to 100% as possible. With proper risk intelligence, any outcome can become greater in a player’s favor.
Do you feel you have the chops to win now that you understand risk intelligence? Good. Head over to the Planet 7 Casino games tab to find the latest, most exciting casino games from blackjack, Keno and roulette and many more. Put those wits to the test and win big. There is no doubt that with a quick real money deposit, you will be taking in cold hard cash in no time. See you at the tables.