# Expected Value (EV) and Variance

Variance means you will experience both downswings and amazing profits when value betting. Here we explain variance and the importance of thinking long-term.

**Expected Value** (or EV) is a measure of what you can expect to win or lose per bet placed in the long run. Expected Value is without variance.

**Variance** measures the difference from the expected value. (How far a set of numbers are spread out from their average value.)

**Real value** is your actual result (profit), which depends on the outcome of the matches. Includes the variance.

### Coin toss example

The probability of a coin to land on Heads is 50%. But assume you get the odds 2.10 on Heads and bet €10.

- If you win you profit €11
- If you lose you lose €10

To calculate the **expected value** of the bet you can use this formula:

*(profit per bet * probability of winning in decimals) – (loss per bet * probability of losing in decimals)*.

In this case: (€11 * 0.5) – (€10 * 0.5) = €0.5

Therefore you would expect to make an average profit of €0.5 (or 5%) for each €10 bet, because *the odds offered are better than the implied odds* of the coin toss.

However, after only one toss you would have either lost €10 or earned €11, not won €0.5. So if you only place 1 bet, the **variance** will be huge.

### Variance will be higher in the beginning

Variance is particularly high when the sample size is small, for instance at the start of your value betting career.

The more bets you place, the variance will have far less effect and your results will over time move closer and align with your expected value. Note that we’re not talking about a few hundred bets, it may require a couple of thousand bets. Read more about statistical significance in sports betting.

### The importance of thinking long-term

It’s important to see value betting as a *long-term* way to profit. The number of bets, as well as using a staking and max bet strategy, play an important role to reduce variance. Here are some tips on how to reduce variance when value betting.

### Downswings are unavoidable, but temporary

Downswings can feel disheartening and unfair. But it’s something you will have to handle, because they are unavoidable. But if you don’t give up, you will also overcome them all.

**Handle downswings**

It’s easy to get stuck focusing on the downswings. This is because we all suffer from *loss aversion* – the pain of losing is psychologically about twice as powerful as the pleasure of gaining.

- Take note and celebrate of your
*upswings*– your lucky winning streaks when you’re clearly over expected value. - Understand why downswings happen. Let’s take the coin toss example again.

If you toss a coin 1500 times, there is a 52% chance you will get a streak of 10 heads or tails. This means if you place 1500 bets with an average true odds of 2.0 you have to expect 10 losses in a row. Or 10 wins. See this calculator.

**You will overcome all downswings**

If you’re having a downswing, there’s no need to panic. Your results will over time get closer to the expected value. This is because of two statistical tendencies: the law of large numbers and regression to the mean.

The law of large numbersexplains that the average of the results obtained from a large number of trials should be close to the expected value, and will tend to become closer as more trials are performed.

This explains why your results tend to, over time, move closer and align with your expected value.

Regression to the meanis all about how data evens out. It basically states that if a variable is extreme the first time you measure it, it will be closer to the average the next time you measure it.

Large downswings from the expected value (a losing streak) is an extreme outcome and will tend to revert back to EV.

So if you have an expected value of 3%, your actual results will, over time, even out to 3% yield (profit per dollar spent). Once again, have patience and think long-term.