Betting Strategy: How to be good and right

Betting Strategy / Jack Houghton / 15 November 2008 / Leave a Comment

The rise of betting exchanges allows punters to buy low, sell high and guarantee themselves a profit. But in the end, says Jack Houghton, long-term profit will always depend on your ability to pick winners.

The joke goes like this. There are ten types of people in the world: those who understand binary and those who don't.

It's a big hit at computing conventions and is reproduced here to underline two indisputable facts. First, computer people don't do funny. Second, assessing the likely result of a horse race is never binary, but the result always is.

A friend recounts the story of watching a two year old, Celtic Swing, win a conditions stakes at Ascot. He believed he had seen a very good horse and backed him to win the following year's 2,000 Guineas at [26.0].

Those who know how the story ends should keep quiet. Don't spoil it for the other two readers.

Celtic Swing was a very good horse. Unfortunately for said friend, despite starting [1.8] favourite for the 2,000 Guineas, he was beaten a head by Pennekamp.

Assessing the bet six months previously had all been about maybes. Is the horse top class? Is he a horse that will train on from two to three? Will he head for the Guineas? Is the price big enough to take a chance on being wrong? Nothing was black and white, but the result, six months later, was.

As Catchphrase's Roy Walker used to say in the halcyon days of TV quiz show buffoonery: it's good but you're not right.

The modern day punter doesn't have the same requirement to get things absolutely right. Being nearly right can still yield profit.

The advent of betting exchanges, and the associated ability to lay horses as well as back them, has meant that punters are able to guarantee themselves a profit before an event has even started. It's a technique known as trading.

The best way to understand trading is to think of it as the buy-low sell-high of betting. Let's take a racing example.

I had £100 on Swansea Bay at [60.0] for the King George after seeing him win a Sandown handicap in a fast time. Just before the race, for which he was third-favourite, I laid £200 on the horse at [9.0]. This meant that I would win £100 if the horse lost (enough for a consoling meal) and £4,300 if the horse won.

It was strange to watch a race without that all-too-familiar gut-wrenching feeling that the mortgage wasn't getting paid if the wrong horse won. Unfortunately, I decided to stand behind a lady who had backed Edredon Bleu (presumably to pay her own mortgage) who buried her umbrella into my groin as she rode a grandstand finish. A different type of gut-wrenching.

Pedants will say there have always been opportunities to profit from such circumstances. Spread betting has allowed you to lay horses for nearly twenty years and I understand that friendly bookies could always be found that offered a similar service. But not everyone has a spread betting account or wants to lay-off with a bookie offering an inflated margin for the service. Betting exchanges have made the process much less arduous.

The examples of trading here have all been about large ante-post price movements. But there are punters who use this buy-low sell-high tactic on a daily basis to try and guarantee themselves small profits in race after race. Being able to predict that a horse will shorten in price from [2.04] to [2.0] is enough to make some low-risk gain.

Unless the horse doesn't shorten in price that is. The value of your investment can go down as well as up.

But perhaps the more important question for most punters is not whether they can make a few quid by predicting these small market movements, but whether they should use the tactic to ease the blow of being nearly right, but ultimately wrong, in ante-post markets.

The answer is that it depends. Theoretically you should assess the current price of the horse and decide whether it still represents value. If you think it does, then arguably you should be putting more money on it, not laying-off.

The reality is that it's more about psychology than theory. If you never lay-off, you will have to steel yourself to longer losing sequences for the promise of longer-term gain. If you decide to always take a profit when available, then your betting bank will be less volatile, but without the occasional fillip of bigger wins.

Of course, at the end of it all, whether you're profitable in the long-run will have a lot more to do with how good you are at identifying the Celtic Swings and Swansea Bays, and much less to do with your chosen laying-off strategy. And the advent of betting exchanges hasn't changed that.