Betting Strategy

As the saying goes...if you don't know what your edge is, then you probably don't have one. To make money from the races, you need a betting strategy that ensures you will be profitable longer term...otherwise known as a Punters Edge. There are literally as many edges to find as there are punters, and we’re here to help you find yours!

Everyone loves to have a punt on the races…it’s fun! But if you have an edge, good money management, an effective staking plan, and implement it all consistently…it's not just fun, it's profitable too! You can make money as a side gig or even replace your income with racing if your consistent enough. How good would it be to be able to set your own hours, be fully in control of your income and work from anywhere in the world!

Below we’ve outlined the process we follow when developing a betting strategy so that you gain a better understanding of how to create your own punting strategy and start making a consistent profit from racing.

Handicapping

Handicapping is essentially the art and science of ranking the field of runners in order of the likelihood of each runner winning, then assigning a probability value to them so the sum of the probabilities adds up to 100%. The more accurately you can do this, the greater your ability to determine if the odds on offer represent value or not. Many times they don’t. Take betting on favourites for example, they win approx. 33% of the time. If you aren’t able to improve that strike rate, you need to be making $2 for every $1 lost, or in decimal odds terms, you need odds better than 3.0 to have a positive expectancy system and be winning long term…I haven’t seen many favourites come in with odds over 3.0, have you? Raising the strike rate to a 60% win rate (which our hot tips provide), means you now need to be achieving an average of 1.67 or better odds to make money long term…much more realistic.

So is handicapping the Holy Grail/Silver Bullet? Well, no, but it is a very important part of a punters toolbox, as I’m sure Bill Benter, the world’s most successful horse racing punter and his mate Alan Woods, a racing expert from Mullumbimby will attest. The pair devised a horse racing system for the Hong Kong race tracks that backed favourites. The key was a handicapping system that allowed them to identify overlays (odds higher than the handicapping probability would indicate) and gave them a repeatable ‘edge’ (positive expectancy system). It’s estimated that Bill Benter earned nearly $1 Billion USD from his racing system.

Handicapping is quite involved and time consuming and there is no guarantee that the race you have worked on will have a good value bet in it, so you could be doing it all for nothing. This is why we do the handicapping hard yards for our members. We’ve come up with a method that brings in all the data, prepares it, performs the modelling, applies the weights to the different form factors and produces an accurate probability for each runner in the race. The accuracy is measured to be an average of +- 0.08% with a 95% confidence level of being within 4% of actual.

Note: To determine what probability the market attributes to a runner, use the equation 1/decimal odds. So if the market is showing win bet odds of 1.80, they believe the probability of the runner winning is 1/1.80 = 56%. Similarly if our handicapping shows a probability of 0.63 (63%), you would be looking for odds of 1/0.63 = 1.59 or better to make it a value bet.

The screenshot below shows an example of the handicapping/races screen you can find in the members area. It's showing horse racing tips for Australia, Swan Hill, Race 5 (29th Sep 2020 if you wanted to look it up). Our tip, marked with a green tick in a circle, is for runner 11 "Confrontational". Looking at the "Odds" column, good value Odds start at $3.23. Good ol' "Confrontational" won that race! He showed a starting price of $3.90 and if you look up the results, the tote prices ranged from $3.60 to $4.60 (NSW Tab paid $4.20) and at Betfair was $4.60 at 1min to the jump...a great value bet, which is exactly what we're after.

Selection Method

The aim of the selection method is to find a way to select runners such that the strike rate and the odds you manage to get when you bet, produces a robust positive expectancy. This is where you need to think outside the box, find patterns or circumstances that put the result in your favour. Having a positive expectancy strategy means it has a good chance of being long term profitable, so the higher the expectancy the better. We tend to aim for at least a 5% edge on our strategies (Exp = 0.05). The caveat here is that past performance does not necessarily mean it will perform the same going forward.

The formula for expectancy is Exp = (1 + (AvgWin/AvgLoss)) * SR – 1, where AvgWin = Average Win Amount, AvgLoss = Average Loss Amount, SR = Strike Rate.

As an example, if you were betting $5 level stakes, managed to pick the winner 60% of the time and got odds of 1.88 on average; Then your AvgWin = (1.88 – 1) * $5 = $4.40, your AvgLoss = $5, and your SR = 0.60. Using the above equation that gives us (1 + ($4.40/$5)) * 0.60 – 1 = 0.1280, which means we can expect to make 12.8% on our investment per race (in our example: $5 bets * 0.128 = $0.64 per race). Calculating that out, if you can find 50 such opportunities a day, you can expect a return of 50 * $0.64 = $32 a day, or $224 a week, or $970 a month, or $11,648 per year…not bad for $5 level stakes betting hey. See if you can figure out what the return would be if you were betting $50 level stakes instead.

Bear in mind that the course of true probabilities never runs that smoothly, you may even spend months in the red before it turns around…the hardest part of being a professional punter is being patient, and having the fortitude to hold on when things aren’t going your way. You need to be able to trust that your edge is a real one. If you follow the testing below, you will develop confidence in your strategy and be able to compare your bets with the test results, easily seeing if the strategy goes off the rails.

Back Testing

A good back test data set should contain at least 1000 separate bets/trades. Preferably several thousand, but you also need a data set for your forward tests. It’s common to split the entire data set in half, or two thirds back test, one third forward test.

When we back test, we are testing our selection method idea to determine if there may be an edge there…we need to know the following:

• How many trades per day,
• The number of winning bets / total number of bets, which gives us our Strike Rate (SR),
• The average win amount, and
• The average loss amount.

Only ever use level stakes bets for back testing and forward testing. It makes the calculations simpler and means any edge we find is more likely to be a true edge, not an accounting mistake.

In reality we back test over and over while we tweak our selection method and find the best values for our selection parameters.

Forward Testing

Forward testing is exactly the same as back testing, but it uses previously unseen data and we don't change our our selection parameters. We do this so we can determine if our selection method holds up going forward and we didn’t just make it fit the back test set of data (called curve fitting). If it doesn’t then of course we go back a step and modify our selection method and back test again until we’re happy to proceed.

You need to be methodical in your testing, making sure your testing frameworks are working properly and you aren’t being overly optimistic about the values you use…such as the odds you get on the bets.

Limit Testing

Now that we’ve back tested until we’re happy we have a positive expectancy selection method and confirmed it with our forward test, we need to know how it might behave when we put into practice so we can create our money management rules and staking plan. Because it’s true that future results may not mirror past results, we need to try and cover all possibilities of outcomes so we have a really good idea of what to expect. If we do our limit testing well, we’ll know pretty quickly if our strategy strays off course or not and we’ll have the confidence to stick with it.

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Money Management

Money management is all about limiting your risk to ensure you stay in the game long enough to profit from those winning runs and ultimately make the returns from your betting strategy that your testing said you could.

It seems fairly obvious, but you need to be able to cover the maximum number of consecutive losses as well as have a large enough account to be able to suffer the draw down. If you only have a $100 account and the minimum bet on the betting platform you use is $5, then you are being forced to place a minimum of 5% per bet and have less than 20 consecutive losses from your testing. This could drastically change the risk of ruin. There is a calculation for the risk of ruin, but we prefer Monte Carlo Simulations (with 1000 sets) as described in the Limit Testing section.

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As the risk of ruin is never truly zero, especially when human error is brought into it, it’s generally a good idea to have another bank or two ready to reload if you blow up your account. Before setting up again though, make sure you understand exactly why the account blew up and what changes need to made before trying again.

Staking Plans

The aim of a staking plan is to maximise your punting profits when you’re on a winning run whilst still maintaining your risk management (money management) profile.

We’ve spent a lot of time investigating and trialling different staking plans and to be honest, none of the touted fancy ones even comes close to the simple and effective staking plan we use. Using any staking plan containing an element of the Martingale plan (increasing your next bet after a loss) is an account blowout waiting to happen and we strongly advise you to stay away from them.

The staking plan we do advise using comes in two parts:

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Live Testing

Congratulations!! If you’ve made it this far you have certainly put in the effort which will now, hopefully, start to pay off. The best advice we can give you at this point is to start small, as small as you possibly can. There is a teething stage where you need to work out how to follow the strategy properly and figure out if your betting strategy works the way you expected it to.

You can do dry runs first without using any money whatsoever, which is a great idea, but when you do eventually come to trading your strategy live, make sure you go through the teething stage and use the smallest bank possible as the live market will be a different proposition than any dry run or test run. You are likely to feel all sorts of different pressures when there is real money on the line.

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Psychology

Possibly the biggest psychological hurdle to get over is to do with expectations. Most people expect lots of wins with an ever increasing account, but the reality is that your account can spend weeks in draw down, well below where it started, before it begins to climb. To make matters worse, in the early days, a small account grows very slowly.

You need to have a realistic understanding of the behaviour of the strategy you are following and what you can expect going forward, not just sign up to a good looking graph. Each strategy we publish has the results you can expect along with the worst case scenarios and probability of it not working. You also need to understand that your friend could start a strategy in January and you start the same strategy in February and you both have very different experiences.

First and foremost, do not use money you can’t afford to lose. Start small, these are high risk investments. A few small banks are better than one large bank. Follow the strategy to the best of your ability and if the account dies, figure out why and if it’s something you can fix, start again. Only if you’re confident you can stick to the strategy should you try it again with one of your backup banks. Sometimes the strategy itself goes bust (there is always a risk of ruin), if that is the reason, then decide if you want to give it another shot before committing another bank.

Start small, small enough you’re comfortable if you lose it all. Think of the bank as paying the fee for the opportunity and that you’re now playing with their money. Follow your betting strategy as close as you can, make an effort to get the best odds for each bet and see what comes of it.

Finding Value

Once you have a strategy to follow, your number one goal is to then get the best odds for each and every bet that you can. This is now how you make money on the races; it’s all about getting the best price. Increasing your average odds by even 1 cent has a huge impact to your final outcome.

You may need to have multiple accounts so you can compare and place odds with different bookies. After a while you’ll get a feel for which ones are generally better than others. To get an overview, there is an odds comparison tool at punters.com.au/odds-comparison/.

We generally like to use Betfair for most of our betting. We've found that the odds are usually better than the bookies and the odds you match at are the odds you get, they don’t change after the fact like pari-mutuel bookies do. All of our betting is also automated betting and Betfair offers a great API you can use to query the market and place bets.

How to get the best price at Betfair is reserved for members only. You can sign up here to unlock it, it's free!

There are also charting apps you can buy which show you the Betfair price movement on a graph. A visual representation may help you to achieve the best price, especially if you use it in conjunction with the information given above.

Final Words

We hope you’ve enjoyed our deep dive into betting strategy development and have come away inspired and with some newfound knowledge on how to make a consistent profit at the races. Following our betting strategy development guide will see you gain a great deal of knowledge and expertise with racing strategy development, but if that is too much work, then you are welcome to sign up and use our strategies while you focus on honing your skills at achieving the best odds for your bets.

Creating a betting strategy is a process you follow; achieving the best odds on each and every bet is a skill you develop. We have given you some great pointers about how to build that skill here and we encourage you to take on the challenge and feedback what you learn.

We sincerely hoped you enjoyed reading this guide and we would love to hear any feedback you might have, feel free to shoot us an email.

Good luck…and don’t forget to have fun!