At the Smart Betting Club, one of our goals is to help all our members not only make money betting through tipsters, systems and strategies but to understand better exactly how a profit is made by different betting experts.
The ultimate goal being to help empower as many people as possible to develop their own betting strategy or even to just help them simply understand some of the concepts of successful betting.
Via our regular Friday Weekend Wager emails, we have featured a number of articles to help with this goal, such as the recent columns from contributor – Herbie Fogg.
In this first of an ongoing set of articles, Herbie looks into value betting when it comes to horse racing – A key concept for every gambler to be aware of.
You can read more about Herbie and his free Key Racing News service here.
Stake According To Profit Margin
Picking good value horses is only the beginning. The mistake most people make is to link their stake purely to the probability of winning.
The size of stake should be controlled by the potential profit margin within the price. When applied correctly, you will often see a bigger stake linked to a longer odds selection – even though, statistically, it has less chance of winning than a 3/1 shot you are also backing on the same card.
Here’s how it works.
In gambling, probability (the chance of winning) is only one side of the coin. Effective betting is not just about winners, it is about the odds offered in comparison to your calculation of chance.
For instance, we may see a horse priced at 3/1, that based on our research we rate a fair 2/1 shot:
The market view 3/1 = 4.00 decimal or a 25.0% probability
Our view 2/1 = 3.00 decimal or a 33.3% probability
Gross margin 33.2% (25 + 33.2% = 33.3)
However the net margin, after costs, does not look so attractive. First we must deduct the bookmakers’ overround – the profit margin built into their prices. Check out this great article on what an overround is if you are unfamiliar with the term.
Lets say for this 9 runner field their overround is 18%. We must also allow a margin for error, not only for our own judgement but the vagaries of racing. Lets look at the effect with a typical 15% margin for error:
Our ‘costs’ 33% (18% overround + 15% margin for error)
Net margin 0.2% (33.2 – 33)
Instead consider a scenario where we see a 5/1 shot priced at 10/1, perhaps because we know something the wider market doesn’t, or for example we have studied the trends and calculated a draw bias with more insight (ie much patient work with the form book):
The market view 10/1 = 11.00 decimal or a 9.09% probability
Our view 5/1 = 6.00 decimal or a 16.67% probability
Gross margin 83.39% (9.09 + 83.39% = 16.67)
Less our costs for a typical 14 runner race (28% overround) – races with more runners offer more scope for horses to be priced incorrectly – plus our usual 15% margin for error:
Our ‘costs’ 43% (28% overround + 15% margin for error)
Net margin 40.39% (83.39 – 43)
This bet is less likely to win (1 in 6), but merits a larger stake than the first example because over time it will be a much more profitable bet to follow.
Backers who fail to make an overall profit, almost without exception, are too concerned with backing winners and maintaining a good strike rate at the expense of finding good value opportunities and staking correctly in the face of prime opportunities that come along.
Although occasionally you can do both, this business is about finding great bets, much more than about finding great horses.
Bon chance,
Herbie
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