Three formats dominate, they all encode the same information, and switching between them is a display setting rather than a different bet.
The three formats#
- Decimal — total return per unit staked, including the stake
- Fractional — profit relative to stake, excluding it
- American — stake needed to win 100, or profit from staking 100
Decimal makes the arithmetic obvious#
Odds of 2.50 return two and a half times the stake in total. Divide one by the decimal odds and you get the implied probability directly — 1 / 2.50 is 0.40, or 40%.
Implied probability is the only number that lets you compare a price against your own opinion.
Why the probabilities sum above 100%#
Add the implied probabilities of every outcome and the total exceeds one hundred percent. The excess is the margin built into the market — the cost of taking the bet.
Reading a price in practice#
- Convert to decimal if it is not already
- Divide one by the odds for implied probability
- Compare that against your own estimate
- Add up the whole market to see the margin you are paying
The short version#
Pick one format and stay with it. Decimal makes implied probability a single division, which is the calculation that actually matters.
