Win on the Swings: Win on the Roundabouts

If you back a horse to win and it wins, you make a profit on the bet. If it loses, you make a loss. If you lay a horse to win and it loses, you make a profit on the bet. If it wins, you make a loss. For you to profit from a bet, the horse must perform as you expect. If it doesn’t, you lose. Now, suppose that I explain a method that, regardless of the outcome of a race, you make a profit. How would that sound?

Too good to be true? Maybe.

Suppose that I gave you the method free of charge? Now what? If I were to give you a method free of charge, it can’t be worth much. Or can it? I’ll let you be the judge. Before I explain the system, there are things which you need to understand about horses, gamblers and human nature.

First, horses.

Horses possess a very strong herding instinct. They herd together to protect themselves from preditors. The fact that race horses are ‘Thoroughbreds’ and no longer have natural enemies is neither here nor there. Their instincts still dictate that they herd together.

Now, in the horse world, there are leaders and followers, just like there are in the world that we humans inhabit. Just like in the human world, there are far fewer leaders in the horse world than there are followers. Therefore, when horses are raced, they will naturally herd together because they are under stress. This explains why horses bunch together in a race.

If there is a leader in a race, it will naturally want to run at the head of the field. If the jockey doesn’t want the horse to do this, he will hold it back. The horse will then fight ‘for his head’ in order to get to the front of the race. This will cause the horse ‘not to settle’ and he will not maintain a steady gallop. The horse will therefore fight for his head and, being denied it by the jockey, will become stressed. The horse may even ‘swish’ its tail. This is definitely a sign that the horse is under stress. This will cause the horse to rapidly burn nervous energy and fade before the end of the race. Generally, if you see a horse fighting for his head and the jockey holding it back, in nine cases out of ten, you can lay the horse because it will, more than likely, lose.

Let’s now consider the followers in the horse world. They want to stay in the pack. That way, they feel safe. In order to get such a horse to go to the front of a race, the horse has to be whipped by the jockey because the horse has no wish to do this. Once in front, such horses begin to feel vulnerable and start to slow down so that the following pack is able to catch up. In this way, the horse can rejoin the pack and feel a degree of safety again. This is why such horses are driven late and hard by their jockeys in the hope that they are in the lead for the shortest possible time and, hopefully, still in the lead when the horse crosses the finishing line.

If a horse is sent into the lead early in a race, if it is a leader, it may well end up still in the lead when it crosses the finishing line. Lay such horses at your peril. If it is a follower, it is likely to fade towards the end of the race and can therefore be confidently layed to lose.

How do you tell a leader from a follower?

If a horse is described in the racing press as a ‘confirmed front runner’, it is very likely to be a leader.

Some horses are described as ‘hold-up horses’ in the racing press. Such horses are generally followers.

Well, that’s essentially what you need to know about horses. At least, with respect to this article.

Before we move on, I once saw Denman and Kauto Star in a field together. They were lazing around, chewing grass and having a good old rest following a tough campaign over the previous winter. Denman sauntered up to Kauto Star and whacked him with his head. Kauto Star lowered his head and slowly backed away from Denman. Denman is definitely the Boss. If these two ever race against one another again and Denman is completely fit, you can confidently lay Kauto Star, good as he his, because there isn’t a chance in hell that Denman will allow Kauto Star to even pass him in a race, let alone beat him.

Now let’s move on.

Remember several pages ago when I promised to explain a method which, regardless of the outcome of a race, regardless of whether or not your selected horse wins, you make a profit? Well, here is the method.

Firstly, select a horse.

Secondly, determine whether the odds of the horse that you have selected will increase or decrease. To assist you in this task, Betfair have provided an aid, To the left of the horse’s name on the betfair betting screen is a graph icon. If this is selected, it will display a graph of the horse’s odds versus time. If the trend line is upwards, it is likely that the horse’s odds will continue to increase. If the trend line is downwards, it is likely that the horse’s odds will continue to decrease.

Thirdly, if you feel that the horse’s odds will increase, lay the horse to loose. Then, when the lay bet has been matched, back the horse to win using a smaller stake and odds which, when multiplied by the stake, will produce a win amount which exceeds the liability of your lay bet. Submit the back bet and await matching.

if you feel that the horse’s odds will decrease, back the horse to win. Then, when the bet has been matched, lay the horse to lose using a larger stake and odds which, when multiplied by the stake, will produce a liability which is less than the amount which would be won if the horse wins. Submit the lay bet and await matching.

In either of these cases, provided that the back and lay bets are matched, a profit will be made regardless of the outcome of the race.

Some people refer to this method as arbitraging. Others refer to it as trading. But, it really is the same thing.

It sounds complicated?

Well, to explain the method more fully, here is a real example from an actual race:

In this example, I felt that Skippers Brig would win but, I also felt that the odds would increase. I therefore looked for a profit on Skippers Brig, regardless of whether it won or lost.

So, I layed Skippers Brig, the favourite in the 14:40 at Leicester on 31st. January 2007. The lay odds were 1.31. My stake was £26.68 and my liability, had Skippers Brig lost, would have been £8.27. After this bet was matched, I waited and the odds on Skippers Brig began to increase, as I expected. When they increased to 1.34, I backed Skippers Brig to win. This time, my stake was £26 (less than my lay stake of £26.68). On this bet, my profit, had Skippers Brig won, would have been £8.84.

When the back to win bet matched, I had won, regardless of whether Skippers Brig won or not. Had Skippers Brig won, I would have won £0.57. Had Skippers Brig lost, I would have won £0.68. As it happened, Skippers Brig lost, as I expected.

The reason why the amounts were small was because I wanted to show an example of arbitraging/trading without risking too much money since I had to take the above screen shot whilst betting. However, with larger amounts, my guaranteed profit would have been larger.

Now let’s look at a different example:

In this example, I felt that Picador would lose but, I also felt that the odds would increase. I therefore looked to decrease the odds at which I layed Picador, just in case it won.

So, I layed Picador, the favourite in the 14:45 at Wolverhampton on 2nd. February 2007. The lay odds were 1.98. My stake was £2.50 and my liability, had Picador lost, would have been £2.45. After this bet was matched, I waited and the odds on Picador began to increase, as I expected. When they increased to 2.14, I backed Picador to win. This time, my stake was £2 (less than my lay stake of £2.50). On this bet, my profit, had Picador won, would have been £2.28.

When the back to win bet matched, I had a net liability on Picador of £0.17 had it won and would have won £0.50 had Picador lost.

What was the net effect of the two bets? I layed Picador at odds of 1/3 instead of approximately evens that were initially being offered. What I had done was to lay a horse at odds considerably less than SP. In fact, it was a third of the SP odds.

As it happened, Picador lost, as I expected.

The reason why the amounts were small was because I wanted to show an example of arbitraging/trading without risking too much money since I had to take the above screen shot whilst betting. However, with larger amounts, my profit would have been larger.

Right, we have now seen two examples of trading and you should now have an understanding of what trading is and how it works.

When, and if, you begin trading it is recommended that you paper trade, at least initially. It is recommended that when you begin using real money, minimum stakes are used until such time as you feel completely confident in the use of the method. It is also recommended that, initially, only small increases or decreases in odds are sought since they will be easier to achieve. This will provide you with the confidence to use and develop the method. Note that although larger odds increases give rise to larger profits, they are more difficult to achieve. The larger the odds differential sought, the larger will be the profit but the correspondingly more difficult it will be to achieve.

The above method can be found in any number of articles on a number of web sites. So, you may ask, what’s different about my use of this method?

Well, here’s the bit that you will not find in any other article or any any other web site.

A couple of years ago, trading was seen as the way forward. Software was written and sold to assist those who wished to trade. Those who had lost money backing or laying horses saw trading as a way of recovering their losses and making a profit in the future. They quickly found that trading was just as unprofitable as backing or laying.

Most people who moved into trading, when it became popular, have now ceased.

Why?

Because they lost money.

Why?

Because, essentially, they all used the same approach.

And?

The approach was flawed.

Most traders layed the horse to lose first and then backed it win when the odds increased. This method was based on the fact that, in a race, there is only one winner. Therefore, towards the end of the race, when it becomes clear which horse is going to win, the odds on all the other horses increase. This causes the back bet to be matched, the trade to be completed and a profit to be made.

This argument sounds plausible.

Why?

Because it is based on indisputable facts. There is only one horse that can win the race and when it becomes clear which one, the odds on all the other horses do, indeed, increase.

So, why did people, who used the method, lose money?

Well, in order to make a profit from trading, one needs to concentrate on horses whose odds fluctuate the most. This usually restricts us to the top three in the betting i.e. the first three favourites. Most trading takes place on the favourite. Now, there is a 50% chance that the odds will decrease and a 50% chance that the odds will increase after the horse has been layed. Therefore, if you close out the trade before the off, in approximately 50% of cases, you will lose money. However, this will be balanced out by the successful trades. Therefore, the net profit, without Betfair commission, will be zero. With Betfair commission, there will be a net loss.

Now, suppose that the trade is not closed out before the off. If the horse wins and the odds do not increase during the race, the liability on the bet will be lost. Given that the odds of the average favourite is about 3/1, this represents a loss of three times the stake. Now, suppose that a trade is closed out after a gain of 10% stake is achieved. That means that 30 successful and consecutive trades must be achieved just to off-set the loss incurred on the lost bet, and this does not allow for Betfair’s commission. Now, given that the strike rate of favourites is in the region of 35%, this is a very tall order indeed. Little wonder then that traders lost money and ceased trading.

Fortunately, there is a way to trade profitably. It involves understanding horses and the human psyche, especially that of gamblers.

Firstly, I suggest that you watch a number of horse races on TV and observe how the bulk of them unfold. Horses herd together for protection. In the vast majority of cases, it isn’t the horse that is in front for much of the race that wins. The winner usually bursts onto the scene fast and late. It usually bursts from the pack at the last possible minute. Therefore, it isn’t until the last one hundred yards of the race, and sometimes a lot less, that it becomes clear which horse will win. I have seen horse after horse go to 1.1 on Betfair and still lose. This is not rare. It’s not even uncommon.

Secondly, observe what happens to the odds of a typical favourite on Betfair. Pre-race, they go up, they go down. There are people who will tell you that they can predict which way the odds will move in the majority of cases. They will talk about the weight of money and all sorts of other theories. The truth is that money is placed on Betfair randomly by punters and the odds therefore move randomly. Therefore, my best advice to you is to ignore pre-race trading altogether.

Now let’s look at what happens to the Betfair odds of a favourite during a typical race.

The favourite isn’t the favourite for no good reason. People have risked their hard-eared to make it favourite. They believe that the horse will win. Otherwise, they wouldn’t risk their money. Favourites have either shown good form in the past, are ridden by a top jockey, trained by a top trainer or a combination thereof.

The smart punters know that races don’t really begin until the last furlong and that it isn’t until the last one hundred yards or so that it becomes clear who the winner will be. Therefore, if the favourite is there, or there abouts, in the closing stages of the race, it is considered to have the best chance of winning when compared with the other horses in the race.

Now, I need to digress at this point to discuss something of importance – the Betfair odds during a race. You may be forgiven if you think that the odds represent the horse’s actual position in the race. They most certainly do not. They represent the horse’s potential to win the race at that point, as percieved by the punters. A case in point was George Washington (bless him). Very often, he was odds-on on Betfair but was still idling at the back of the field during the race. The minute his jockey asked for an effort, the odds dropped immediately since it was assumed that he would win, regardless of his position in the race.

Now, if we put the above two things together, provided that the favourite gets a reasonable start, and is seen by the punters as going at least reasonably well, the odds on the favourite will begin to fall slowly. The fact that other horses may have had a better start or may look to be going better is, largely, irrelevant. As long as the favourite remains in contention and appears to be at least capable of winning, the odds will continue to fall. This trend will continue until the race begins to get serious and the horses begin their runs for home. When the favourite begins his run, as long as it looks promising, the odds will begin to fall more quickly. Finally, when the outcome of the race becomes a foregone conclusion, the odds on the race leader will suddenly decrease and the odds on the remaining runners will suddenly increase.

Now, if we analyse the above, the odds on the favourite will slowly fall unless the favourite does something untoward. For the odds to fall on one of the other horses, their performance must be above average.

Knowing this, how can we use it to our advantage?

In the normal course of events, the odds on the favourite fall during the race, it therefore makes sense to back the favourite to win and then lay it to lose when the odds decrease. This is the exact opposite of how most traders acted and is probably the main reason why most traders lost money.

Should we back the horse to win pre-race or in-running?

In my opinion, we should back the favourite to win in-running, rather than pre-race. The reason for this is that if the favourite is backed pre-race and it starts the race badly, it will more than likely lose and the bet will be lost. Also, when the betting is close, it is unclear which horse will start favourite until just before the off.

The best strategy is therefore to back the favourite to win as soon after the start of the race as possible, provided that it makes a reasonable start. Should you not have access to a TV screen to view the race, if the in-running odds, shortly after the start, do not appreciably differ from the pre-race odds, shortly before the start, then it can be safely assumed that the favourite made at least a reasonable start. Then, when the bet has been matched, a second bet should be submitted. The bet, in this case, should be a lay to lose bet. When the odds on the favourite fall, the lay bet will be matched and a profit made, irrespective of the outcome of the race.

Should we back and then lay all favourites?

In my opinion, no.

Why?

Earlier, I stated that the strike rate of favourites is approximately 35%. However, it varies according to which type of race the favourite is competing in. There are certain types of races where the strike rates are much higher. In the following race types, the strike rates are all above 42%:

Maidens (Flat only)

Non-Handicap Novice Hurdles

Non-Handicap Novice Chases

Hunter Chases

In the above race types, the favourite has a much better chance of winning than it has in other types of races. As such, the odds of the favourite are much more likely to fall than in other race types and we therefore stand a much better chance of securing a successful trade in these types of races.

If the horse stands a good chance of winning these types of races, why would we then lay the favourite to lose?

Because, I have seen the odds of horses (including favourites) on Betfair fall to as little as 1.1 and the horse has still gone on to lose. This is a frequent occurrence.

Now, here is a detailed description of the method.

If the race is not one of the above type races (Maiden -flat) etc., ignore the race. If it is, make a note of the Betfair odds of the favourite just before the off. When the race begins, compare the odds of the favourite with the pre-race odds just before the race began. If the odds are close (less than 10% difference), the favourite made a reasonable start and you should back the horse to win.

Set the stake of your bet to 5% of your betting bank and submit the bet for matching. In this way, should the horse lose and your trade fail, your losses are containable.

Once the back bet has been matched, create a lay bet on the favourite to lose.

Buy what about the stake and the odds of the lay bet I hear you ask?

The greater your required profit on the two bets, the more the odds will need to fall. The more the odds need to fall, the more difficult it will be to achieve your required profit. The less that the odds need to fall in order that you are able to achieve your target profit, the less profit you will make. We therefore need to balance the required profit with the ease with which the target profit is achieved.

I have found that the ‘one sixth’ rule is the best compromise.

To calculate the stake on the lay bet, increase the stake that was used on the back bet by one sixth. So, if you backed the horse to win using a stake of £6, the stake on the lay bet should be set to £7.

Now for the odds of the lay bet.

Create a lay bet in Betfair on the favourite using the stake as calculated above. Now, for the odds. To the right of the Betfair odds box, you will see an up and a down arrow. Use the down arrow to change the odds of the bet until the liability of the bet is set to the profit on the back bet minus one sixth.

So, let’s say that your betting bank starts out at £1,000. The stake on the back bet should therefore be set to 1,000/20 = £50. Let’s also say that the odds on the favourite winning were 5.0 on Betfair. That means that if the horse wins, you would win £50 x (5.0 – 1) = £50 X 4 = £200. If the horse loses, you would lose your stake of £50.

When your back bet has been matched, calculate the stake on the lay bet by increasing the stake on the back bet by one sixth. So, if the stake on the back bet was £50. An increase of one sixth is 50/6 = £8.33. Therefore, the stake on your lay bet should be set to £50 + £8.33 = £58.33.

Now to calculate the odds of the lay bet.

When you placed the back bet, if your horse wins, you will win. The win amount should be reduced by one sixth. So, in the above example, the win amount on the back bet is £200. If we reduce this by one sixth, we end up with £200 – (200/6) = 200 – 33.33 = £167.66. This represents the liability of the lay bet. Therefore, having entered the stake of the lay bet (£58.33), we then should use the down arrow key to the right of the Betfair odds box until the liability of the bet is as close to £167.66 as it is possible to get. If we use the above as an example, the odds will be in the region of 3.85. We then submit the lay bet and await matching.

If the horse’s odds do not go as low at 3.85 during the race, the horse will have lost and we will have lost £50. However, if the horse’s odds, at any time during the race, fall to 3.85, it doesn’t matter if the horse wins or not, we will win.

If the horse’s odds fall to 3.85 at any time during the race and it goes on to win, we will win £200 on the first bet and lose £167.66 on the second bet leaving us with a profit of £33.34 (before the 5% Betfair commission).

If the horse’s odds fall to 3.85 at any time during the race and it goes on to lose, we will lose £50 on the first bet and win £58.33 on the second bet leaving us with a profit of £8.33 (before the 5% Betfair commission). So, regardless of whether or not the horse wins, as long as the horse’s odds fall to 3.85 at some point during the race, we will make a profit.

Psycho

http://www.laythepsychicway.com/

www.psychosshortlays.com

http://www.psycholaysdogs.com/