This blog summarises some of the fundamental things you should think about when trying to bet for long-term profit. It solely covers betting and not race analysis.
What is the most basic concept of betting? Many people think it’s about picking the most likely winner and then having a bet on it. They’re wrong.
Success in betting is about more accurately identifying the chance of success than the market does, finding the edge and then betting on it in a sensible fashion over time.
In horse racing, that means roughly quantifying the chance of a horse winning a race, quantifying the chance in a market (be that with a bookmaker or exchange), and finding the horse(s) where your sense of their chance heavily outweighs the market’s sense of chance.
Much of the time, the most likely winner of a race is not the value horse in any given market. People having a bet - putting their money into a market - can often see which of the runners has a good chance of winning, and as a result the favourite is often in a market at a lower price than the horse’s actual chance is.
It can feel counterintuitive to bet on a horse that you don’t think is the most likely winner. But if that is where the value lies, it is the only long-term profitable decision.
Identifying the edge in a market
Imagine a race with four runners. You analyse every angle you can and decide that the four horses’ chances are 50%, 25%, 20% and 5% respectively. Another way to think about it is if the race were to be run 100 times, the first horse would win about 50 times.
That’s an excellent strike rate. But now let’s imagine the market. Horse A is 4/5, Horse B is 5/1, Horse C is 5/1 and Horse D is 12/1. Let’s assume that your analysis of chance is right, let’s hypothetically run the race 100 times and you put £1 on the favourite each time.
- Fifty times, you made £0.80 plus your £1 to give you £90.
- Fifty times, you lost and made £0.
- Over the 100 races, you’ve bet £100 and you’ve made a loss of £10.
Let's (hypothetically) run the race 100 times again and this time you put £1 on the second horse.
- Twenty five times, you made £5 plus your £1 to give you £150
- Seventy five times, you lost and made £0.
- Over the 100 races, you’ve bet £100 and you’ve made a profit of £50.
The long-term profitable decision in this example is to back the second horse. You can look at the flipping of a coin in the same way. Bet evens on tails and over time you’ll break even. Bet 6/4 and eventually you’ll make a profit. Bet 4/6 and eventually you’ll lose.
That is the basic concept of betting.
The reality is obviously more difficult than the hypothetical. The best horse racing tipsters and bettors do it time and time again. Each day, they find horses who are a bigger price in the market than they really should be. Hugh Taylor does it every day. It is why the horse’s price falls the moment he posts his selections.
It isn’t easy. I’ve struggled to do it over the long-term (managing it well in 2020 and less well so far in 2021). If you’re thinking about giving it a go, here are some of my simple recommendations.
Understand betting as an investment
Betting well means treating it like an investment. It is why people talk of ROI (return on investment) and betting banks. Betting as an investment means having a disciplined approach: understand your staking, understand your limits, and understand the role of wins and losses in your approach.
Deal with losing
Let’s go back to the 5/1 horse that wins 25% of the time at a ROI of 50%. It loses 75% of the time. And losing is not mechanical. You don’t win one, lose three then repeat. You win a few in a row, then lose a lot in a row.
Understanding, accepting and dealing with the uncertainty of betting is fundamental to making long-term profit.
That doesn’t mean backing blindly during a bad run. Nor does it mean wildly increasing your stakes because you’re on a good run. It means acknowledging that the process of your thoughts and decisions are far more important than one individual result. Are you accurately reading a market? Are you accurately quantifying a horse’s chance and betting (or not) accordingly? You can lose a few races and still be doing those things right, just like you can win a few races and be doing those things wrong.
Understand betting banks and drawdowns
Dealing with losses means accepting drawdowns - the amount of money you lose when a losing run builds up. Some tipsters recommend betting banks of 50, 75, 100 or 200 points (see below). Treating betting as an investment means understanding these drawdowns, accounting for them, analysing them and responding to them well.
Different tipsters and bettors will play at different odds, have different strike rates and different drawdowns. Some examples:
- You could have a strike rate of 30% at average odds of 9/4. A healthy return of 22%.
- You could have a strike rate of 25% at average odds of 5/1. A very healthy return of 50% but a lower strike rate and bigger drawdowns.
- You could have a strike rate of 10% at average odds of 20/1. An exceptional return of 110% but a much lower strike rate and far bigger drawdowns.
It is not always a trade-off between strike rate and profit. But it is an important consideration when beginning to bet as an investment or finding a suitable tipster for you.
Tipsters talk of bets as points (pts). A point is a percentage of your betting bank. Let’s assume a betting bank of 100pts and an investment of £100. One point equals £1. In a betting bank of 100pts and an investment of £1000, one point equals £10.
Different bettors and tipsters have different approaches to staking. Some do level staking of 1pt win. Some vary their staking. The key is to find an approach with which you are comfortable and meets your wants and needs from betting.
To repeat the fundamental point: making a long-term profit means being ahead of the market. It means finding an edge. To do that requires understanding something that the market generally does not. It is what Hugh Taylor does so well.
Tipsters and bettors do this in different ways. Some focus solely on one code of racing (eg the jumps). Some focus only on handicaps. Some produce systems. Some produce ratings. Some do only one tip each day to focus their analysis on one race. All have their strengths and weaknesses and you should do your research before you just assume the past is a good predictor of the future.
To stay ahead of the market you need to consider what your approaches and practices are, and keep on developing them. There won’t always be an obvious 5/1 shot that will win 25% of the time. If there was, the market will soon realise and make it 3/1. Then you’ve lost your edge.
Remaining curious and vigilant in your approach to - and enjoyment of - the sport is crucial. Taking occasional breaks will probably help too.
Making profit (maybe)
Doing all of these things still might not make you a profit. I try to do them well, and I’m forever learning (with mixed results). If you choose to bet using your own judgements or decide to subscribe to a tipster, these thoughts can hopefully help you to settle upon the approach(es) that make you a profit.