How to Profit From Being Nearly Right

Introduction

In this hopefully worthwhile blog, I will be looking in-depth at some of the tools available to punters and identifying ways that each might be used profitably. 

This will include " the most interesting ‘product' available to us in terms of an insurance policy"  which is the ability to bet in running.

For those who love or want to learn about this please check out the brilliant OLBG in-running betting guide.

Ultimately though, I hope to be able to combine the place, in running and spread markets into one simple strategy, this will bolt onto my favoured way of betting, the win-only market. 

To make the blog more readable, I have broken it down into the following chapters

Subject	Description
1. Background Behind the Blog	A Light-Hearted Start!
2.Each-Way Betting	The Facts, Maths and the Myths
3. The Betfair Place Market	Understanding the Product
4.Spread Betting	Race Indices, Something Different Again
5. Laying Back In-Running	The Insurance Policy
6. The Strategy	Go Straight Here if You Get Bored of Reading!
7. Final Strategy Instructions	Testing, Testing
8. The Results	Will it Work?

1. Background Behind the Blog

It was the wife actually, who having watched the latest bet get beat by half a pixel on Betfair Video with an air of calm expectancy, asked why I didn't start betting each-way? 

Given that she largely takes charge of spending the winnings each month to ensure that we do not get trapped by excessive wealth, she has a vested interest!

It is true that in reality, I rarely bet each-way and given that I seem to be able to pick horses destined to come second with alarming frequency, it was maybe time for a re-think. 

A little market research in my local Coral establishment (the coffee is free) revealed that I was not alone. Other punters had exactly the same skill in finding plenty of good seconds against the odd winner.

Why so? Well perhaps, if one is honest, one might suspect that the tricky memory plays tricks and in reality, maybe we win as many photo-finishes as we lose, not convinced? no, nor am I !

Next question then, do we deserve any better? 

A horse beaten a short-head at 33/1 loses. It lost. It didn't win. We got the bet wrong so we deserve to have lost our money. How much harder is it to swallow though in that scenario than if we get beat 20-lengths?

The purpose of this blog is therefore to look at how we might make a profit, minimize our losses and generally derive some benefit from getting it ‘nearly right', without making the simplistic assumption that each-way betting is necessarily the best way.

2. Each Way Betting

It is important to understand the maths behind the product and use this as the foundation for building a strategy and so to start off with, let's get the boring bit out the way and remind ourselves of the usual each-way terms offered by bookmakers.

Race	Runners	Odds	Places Paid
Non-handicaps	5-7	1/4 (25%)	1,2
Non-handicaps	8-15	1/5 (20%)	1,2,3
Handicaps	8-11	1/5 (20%)	1.2.3
Handicaps	12-15	1/4 (25%)	1,2,3
Handicaps	16+	1/4 (25%)	1,2.3,4

Is this set-up mathematically correct? Does it favour either punter or bookie? 

N.B I have converted the odds to percentages as this makes it easier to compare.

These are not questions that have simple answers but a good start is to look at the true chance of a horse being placed. 

This leads to another complex question as the relative chance of a horse against his rivals will result in a different % chance of his being placed and so for now, let's assume each horse has an equal chance. 

This would mean each horse had the following chance of a 1,2 place in the races below:

• 5-runners - 40% chance (Equivalent to 2/5 odds)
• 6-runners - 33% chance (1/3 odds)
• 7-runners - 29% (2/7 odds)

We can immediately see that the 25% offered by the bookie does not favour the punter in any of the scenarios but perhaps a little less obvious, the disadvantage is much greater in a 5-runner race than a 7-runner race.

Moving on to fields with 8-runners or more;

•  8-runners -  37%
•  9- runners - 33%
• 10-runners - 30%
• 11-runners - 27%
• 12-runners - 25%
• 13-runners - 23%
• 14-runners - 21%
• 15-runners - 20%

• 16-runners (4-places) - 25%
• 20-runners (4-places) - 20%
• 25-runners (4-places) - 16%

At 1/5 odds, there is no advantage to the punter but at ¼ the odds, fields of 13-15 runners and fields above 16-runners all appear to offer some advantage to the punter.

In order to determine if things are this simple, let's consider a fictional example.

Example

100-races; 20-runners per race, each horse's odds 19/1

£10 win on each horse would return exactly £1000 after 5-winners (the expected number), the sum invested.

£5 each-way though would return only £927.50, so where have things gone wrong?

The ‘lost' money is because when our horse won, we have messed up because half our stake only went on the each-way odds, ¼ the win odds. Ouch!

It seems we have to pay a premium for the privilege of each-way betting even when the odds appear to be in our favour. 

Still, there is potentially a way to make things work for us.

The above example went astray because we backed too many winners.

If one of our winners had finished second, then our return on £10 win would have been £800 yet our £5 each-way would have returned £951.25. 

This is an important point to adopt, and not an obvious one perhaps -" when betting each-way, we don't really want to back winners!

The opportunity then (maybe), is to look for horses that have a better chance of placing than the horse's odds suggest. 

Now the maths involved in working out a horse's chance of finishing second or third are complicated enough but it can be done with a pot of strong coffee, a few hours of work and a spreadsheet.

To illustrate what I mean, is a 7/1 chance in an 8-runner race a good bet each-way? 

Most of us would have a general view on this but we need to consider things more deeply. 

Let's put our 7/1 chance into two separate races;

Odds for race A - 7/1, 7/1, 7/1, 7/1, 7/1, 7/1, 7/1, 7/1

Odds for race B - 1/4, 7/1, 50/1, 100/1, 100/1, 100/1, 100/1, 100/1

It might be reasonable to assume we have a better chance of placing in race B than race A. 

The actual odds are:

Race A -" chance of winning 12.5%, the chance of placing 25%

Race B -" chance of winning 8%, the chance of placing 76%

So we need to understand a horse's chance of placing with some accuracy. 

We can see with this simple example that there is an opportunity. 

The bookie offers you 1/5 odds on a 7/1 shot in an 8-runner race, regardless of the true chance of the horse being placed and in race B, not only do we have a much better chance of placing, we actually have a lesser chance of winning, which is also good!

Although it is obvious that the stake is lost if our each-way bet is unplaced; it is perhaps not always thought that backing a winning horse with each-way bet is actually a negative result long-term, but it is just that. 

To repeat; if you have backed a winner each-way, you have messed-up!

3. The Betfair Place Market

The significant difference between this market and each-way betting is that there is no ‘winner' in the place market; the winner of the race is treated just the same as if it had placed so the ‘problem' of backing a winner each-way has been dealt with.  

What we can expect then is a slightly higher return on a placed horse, paid for by the fact that a winner returns just the same as the third-placed horse. 

Given that we have established that a winner is bad news on an each-way bet, this seems a price worth paying.

It isn't so easy to map examples using Betfair markets as they are much more dynamic but in our earlier example of the 7/1 chance that had a markedly different chance of placing in Race B than Race A; the Betfair place market would be expected to have largely factored this in. 

This removes an opportunity there then but that is fine, so long we understand what's going on.

Another possible advantage of the Betfair place market is that the number of places is determined based on the number of declared runners when the market opens.

So an 8-runner race with two subsequent non-runners will still be traded as 3-to-place as opposed to the each-way market, which will adjust the number of paid places to 2 in this circumstance.

4. Spread Betting - The Race Indices Market

I am aware that spread betting is a bit niche and I have written in-depth about this market previously but the 50-25-10 index or 50-30-20-10 index can bring something to the party and is worth including briefly in this blog.

Basically, this is the only product where a second place is rewarded more than a third in an 8-runner race, a third is rewarded more than a fourth in a 16-runner handicap and so we have a situation where the closer we get to first place, the greater our potential profit. 

How can we best take advantage of this potential opportunity? Again, given a set of odds, it is possible to work out a horse's chance of being second or third but perhaps that is too automated.

The type of bet that this market can work well for is a horse that is consistent, not one that is all or nothing and it can also work well when buying a 40/1 or 50/1 handicapper in say, a Heritage Handicap.

5. Laying Back In-Running

This is, without a doubt, the most interesting ‘product' available to us in terms of an insurance policy. Just to remind, I am looking at how we might derive some compensation from getting things ‘nearly right'.

If we look at the freely available data on Betfair as to how low each runner traded in-running, it is nothing short of staggering how many horses trade at odds of 1/5, 1/20, and quite commonly 1.01 and still get beaten. 

As I am writing this, Imperial Commander has just been beaten a good half-length by Cape Tribulation, yet over £30k was traded at the minimum odds of 1.01.

The simple reason for what I will call a phenomenon is that people over-react to things when betting in running.

Once a horse looks like he is going to win, the odds tumble, and a kind of hysteria takes over, resulting in oh so many horses dropping to ridiculously short odds before getting beat.

Of course, there is the consideration that horses given to front-running will tend to trade shorter on average in a ‘look like it's going to win' scenario than one who is ridden from the back and a hold-up horse may be beaten a neck without ever trading that short, whereas a horse that got caught on the line will almost certainly have traded at odds-on.

So, it might make sense in some circumstances to close out at a ‘short price'.

I think it necessary to define ‘short price' and I think this can only be a % of the price taken rather than a fixed value. 

If we back a horse on the exchange at 34 (33/1), then if we close out at 2.0 (Evens), what we have done is bought an ‘insurance policy' that will cost us if we win as we will then have a 32/1 winner, not 33/1. 

However, if we lose, we have not lost our stake potentially and so on the face of it, this seems a good idea in principle, albeit we need to decide at what price to close out.

6. THE STRATEGY

It is time to pull some of the above together and draft a system that might work. Before I complete on this, I need to make a point that I believe in very strongly;

I have at my disposal years of data and I could go back through my betting history and come up with any number of profitable systems, strategies, and the like that I can prove work because I can show they would have worked had I used them on said historical data, this I consider absolute rubbish!

Far too many people delude themselves and more importantly others in this way and this in part accounts for my distrust of all things systems and stats.

What, in my opinion, is absolutely fundamental is to draft a system based on logic, experience, and instinct and then see if it works using fresh data from that day forwards. 

That is the approach I will be following but more on that in the next section.

Back to the strategy and it occurs to me now that a horrendously complex system is not going to be the way to go and so I am going to cut a couple of the topics above loose.

Each-way betting, as discussed in that section, can be beneficial and I have tried to highlight when and how. I think therefore that the way to use that is to understand the chance of your bet being placed against the relative odds and that has to be done on a race by race basis, it doesn't lend itself to ‘blind' strategy. 

When time permits, I will add something to a daily forum to show the true chance of a horse placing based on the odds of each runner in a number of races and see if we can highlight some decent each-way bets.

Spread Betting is also best left to itself as I am very aware that this remains a very niche way of betting and for most, this wouldn't fold easily into a wider strategy.

So, in search of a simple, easy to implement and ‘blind' strategy that may be useful to others who have a Betfair account, I am going to suggest the following based on both place betting and laying-back in running. I have no pre-conception if it will work other than instinct really but I am hopeful.

My preference is not to reduce my win stake and compromise any profit and so my place bets are going to be additional to my win stake. 

Laying back in-running does reduce the winning return of course but as discussed, this may be a worthwhile cost.

7. Final Strategy Instructions

1. Win stake as normal

2. Additional place only stake based on the following;

The number of unplaced horses in race X number of places = % of win stake to be staked on the place-only market.

To show a few samples in table format:

• 5-runner race = 3 unplaced horses x 2 places = 6% of win stake
• 6-runners = 4 x 2 = 8%
• 7-runners = 5 x 2 = 10%
• 8-runners = 5 x 3 = 15%
• 12-runners = 9 x 3 = 27%
• 16-runners (3-places) = 13 x 3 = 39%
• 16-runners (4-places) = 12 x 4 = 48%
• 40-runners (4-places) = 36 x 4 = 144%

3. Lay back in-running

A simple policy here. Lay back at 5% of the odds taken, so a price of 8.2 equates to 7.2/1 and so 5% would be 0.36/1, Betfair odds of 1.36. 

I hope that makes sense! How have I chosen 5% as a figure? Really just an educated guess as to what might be the right level so we will see.

In terms of the stake, I like to lay back at the original stake plus £2, just to give a small profit whatever the outcome if the lay is matched so I will do this as part of the exercise.

8. The Results

To prove the system or otherwise, I will keep a spreadsheet of my next hundred bets logging the pure win method, what would have happened if I had implemented the place strategy, the same with the laying back strategy, and of course, both insurance strategies combined. 

One of the golden rules of in running betting is to have a strategy and stick to it, test it over a period of time and then decide, always let the results guide you

I will show the results as 100% win or 100% loss if just playing the straight win and then adjusting the 100% for the effect of the other strategies; so a win bet with the place element.

For example, a horse placed second will yield a 100% loss; (100%) on the win market. 

Should the horse be placed though, this will return something so the loss might only be, say, (86%).

If the horse is out of the placings, the loss will be greater than 100%. Summing the cumulative profits & losses as % will show which would have been the best strategies.

Rather than use the actual odds taken, I will use Betfair SP as this will provide a correlation between the win and place odds which will be necessary to accurately judge the results.

As I go, I will try and keep the blog updated with the results so far.

Any comments or questions welcome.