Is the crowd wise? Revealing the results of a popular trading strategy study.
Knowing how to predict is one of the most important skills when it comes to betting on events. Although making an accurate prediction can sometimes be difficult, appealing to the wisdom of the crowd seems practical and, moreover, quite accurate. In this article, we will look at how the “wisdom of the crowd” works and, more importantly, how this strategy can be applied to playing Polars successfully.
The concept of: Crowd Wisdom
The general idea characterizing the essence of “crowd wisdom” is that large groups of people can collectively make smarter decisions than individuals. And if we use a decentralized infrastructure, this concept manifests itself even more vividly, as decentralized organizations rely more on collective consensus and market mechanisms than on hierarchical expertise.
How it can affect the prediction of sports betting
The outcome of a sporting event cannot be known a priori, but even in such circumstances the crowd usually provides an accurate estimate of the respective probabilities of the outcome.
Crowd wisdom works because of the large number and wide range of people predicting the outcome of a particular scenario. According to the theory, participants will overestimate and underestimate outcomes about equally, resulting in an average of their predictions that is as close to ideal as possible.
While this method cannot guarantee that you will guess the exact number, in most cases your assumptions should be at least somewhat close to the actual outcome.
An example from history
In 1906, the scientist Galton noticed an interesting scene at a livestock fair where visitors were trying to determine the exact weight of cut meat. He later discovered that although all the guesses were wrong, their combined median differed from the actual answer by only 0.8 percent. This idea was quickly picked up by other researchers and proved applicable to almost any possible scenario.
Taking advantage of the wisdom of the crowd
How can knowing all this be useful? In betting on all sorts of events, there is no single winning formula or information that will dramatically increase your profits. However, understanding the “wisdom of the crowd” and the “herd mentality” can help shape strategies and methods in the market.
10,000 people can’t be wrong. This may sound more like an advertising slogan than a betting strategy, but it’s more of a truism than you might expect. The key is to reduce betting to the act of backing up opinion with money; what matters is how we interpret aggregate opinion, when the crowd is wise and when it is just a herd.
This is the key point; even if a large group of users votes for one of the possible outcomes of an event and backs up their opinion with money, we cannot be one hundred percent sure that this is “wisdom”; it is more likely that their opinion was influenced by some factors, and this action turned into herd instinct, which is another matter entirely.
Results of the study
Now that you have the information you need to understand how “crowd wisdom” works, we can move on to the results of our study.
The task was set as follows: to find a correlation between victories of the white or black team depending on which votes one of them gets. Confirmation of the “wisdom of the crowd” strategy would be the frequent (more than 50%) victory of the team with the most votes.
Over a long period of time, we participated in a large number of events, buying tokens of the White or Black team that the majority of users voted for, and recording a profit or loss immediately after the event ended.
The results were mixed. The strategy proved to be effective in soccer competitions: statistics showed that the team that the majority voted for won more often than their opponents. The same could not be said for other disciplines or events, such as basketball or tossups. In these events the strategy failed to show itself clearly, the outcome of the event in this case the crowd was guessing about 50/50.
Such results can be explained. The effectiveness of this strategy for soccer can be understood because soccer is a popular game around the world and has a huge fan base, and at the same time people have a clearer, more formed opinion about the results of the game between opposing teams. As for other events, they are less popular and most people do not have a clear opinion on the results and therefore often vote at random rather than based on their knowledge and experience.
Because of this, we would not recommend referring to the opinion of the majority and analyzing all the trades yourself.
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