Originally invented as an improved chess rating system by Hungarian-born American master level chess player and physics professor Arpad Elo, the Elo ratings is a way of comparing the skill levers of players in competitor-versus-competitor games.
The method has since been adapted for several sports and is now widely used in assessing the performance of soccer teams. Here’s how Elo ratings work with examples from the upcoming Champion League fixtures.
When applying the Elo system in soccer, every team has a rating for each point in time and the higher it is the stronger the team. The ratings are constantly re-calculated in order to include the outcomes of matches between rated teams.
The winner takes points from the loser, with the total number of points at stake depending on the rating difference between the opposing teams.
The essence of Elo ratings is that the winner takes points from the losing team. The number of points in the total pool for each match depends on the difference between the ratings of the teams.
When a high-rated team wins against a low-rated team only a few ratings points will be deducted from the losing team, whereas if the lower-rated team scores an upset, a proportionally larger number of rating points will be transferred. In the event of a draw, the pot is shared equally.
The basic maths
Here’s how the basic calculation for Real Madrid vs. Manchester City, playing on Wednesday 4th May for the second leg of Champion league’s semi-final. The teams are both within the top 10 with 2074 and 1861 points respectively, according to the ClubElo rankings.
By calculating 5% of their respective ranking, Real Madrid will be risking 104 points and Man City 93, the total pot contains 197 points. Therefore, here are the three possible outcomes:
- Real Madrid wins (1.518*). Their ratings increases by 93 to 2167 and Man City’s rating decreases to 1768.
- Man City wins (6.86*). Their rating increases by 104 to 1965 and Real Madrid’s rating decreases to 1970.
- Draw (4.64*). The pot (197) is divided equally between the two teams 98.5:98.5 resulting in a slight increase to 1866.5 for Man City and a slight decrease to 2068.5 for Real Madrid.
Including other factors
The above calculations demonstrate the basic mechanics behind the Elo values in soccer. However, anyone with a basic understanding of soccer would guess that there is a major problem. Crucial factors, such as home advantage, are not taken into consideration.
In the above example, it is obvious that a draw of 1-1 between the two sides in Madrid is a clearly better result for the Englishmen than it is for the Spaniards, considering that the first game ended in a goalless draw, and it is therefore irrational for Real Madrid to walk away at full-time slightly penalised for failing to progress to the Champions League final.
For that reason the calculation for Elo values in soccer is usually adjusted to include major factors such home advantage, goal difference, two-leg matches etc. Below are the Elo ratings of the top 10 teams according to ClubElo:
Top 10 Elo ratings
Updated on 04.05.2016
Using Elo ratings in betting
The main limitation bettors should keep in mind when referring to Elo ratings is the fact that the calculations of Elo values are based exclusively on past performance. With no account for individual players, it can be argued that the Elo system may lose some of its predictive power when certain circumstances – such as injuries, new manager/players, tactics etc – arise. Elo will only respond to such changes over time.
Despite that, the Elo system is widely used by sharp bettors as a reliable tool in the search of value bets, i.e.bets with positive expected value, because it provides a solid statistical foundation for calculating the probabilities of the different outcomes with great accuracy. This is particularly the case when a competition progresses towards its final stages, like the Champion League round of 16, as the weaker teams have been eliminated and it is getting harder and harder to predict the winners.
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