Pari-mutuel Wagering

thoroughbredclass01

True Class Today

Thoroughbred Horse Racing at Santa Anita Park

Algorithms assign numerical ratings for the Primary, Secondary and Unknown Handicapping Factors.  A raw probability rating, weighted for the specific race type and conditions, is then calculated from these data and adjusted for the racetrack takeout; thereby producing the contender's adjusted win probability rating and fair odds; since it was calculated in relation to the specific group of horses assembled for this race today, we call the rating "True Class Today".

We attempt to quantify Thoroughbred Class by evaluating each Primary Factor independently (rating), in relationship to all factors (weighting); insofar as they contribute to the horse's Class (estimating). The resulting numerical value attributed to each horse represents our best attempt to estimate its probability of winning, based upon Class, Breeding, Speed, ability to sustain a Pace and Current Form; as influenced by the Secondary and Unknown Handicapping Factors.

Akin to a major league baseball player's batting average, it represents the probability of winning this race today.  Thus, a horse with a "True Class Today" rating of 245 is estimated to have a 24.5% probability of winning today, its raw odds are 3:1 and its Fair Odds will be 4:1 or greater. CU@the$window!

 

The Realm of Gambling

Thoroughbred Horse Racing at The Great Race Place Santa Anita Park

oddsboard

A whole lot of people got to get up real early and do a whole lot of work so I could place that wager, it's about connecting to those winning energy currents that begin to peak early in the morning on race day and buzz all around us like a whirling dynamo by post time; and that's a dynamic process.

The Law of Large Numbers

Wagering on thoroughbred horse races is a thinking person's game, one in which the players who apply skill with discipline can expect to make a profit.  This is due to one of the principles of probability, referred to as the Law of Large Numbers; which provides that despite extended streaks one way or another, the frequency of events with the same likelihood of occurrence will even out over time, reverting to an expected value with enough trials or instances.

Think of a coin flip, with a 50% probability it could land heads and 50% probability it may be tails.  If one were to flip the coin eight times per day for a year, it's possible that heads might appear eight times in a row some day, in fact, heads might appear eight times in a row for eight days in a row; however, the Law of Large Numbers states that approaching (365 x 8 = 2,920) flips of the coin, the results will tend towards a point of equilibrium (1,460 heads and 1,460 tails).

The principle, exploited by casinos all over the world to generate billions of dollars per year, ensures that in the long run the house always wins; as it guarantees stable long-term results for the averages of random events.  For example, if a game of roulette pays at 35:1 odds, yet there are 37 possible events for players to wager upon; then the house owns an advantage of 2/37, which translates to around 5.40%.

Consequently, even if the casino loses money on a single spin of the wheel, its earnings will move towards a predictable percentage over time with every spin.  The parameters of the game will overcome any winning streak and at the end of the year, the casino can expect to earn no less than 5.40% of its roulette handle in profit.

Similarly, a horse player can employ the Law of Large Numbers to some advantage over time but in order to be successful, the player must be in possession of:

1) Reliable information as to the true win probability of each horse in every race;

2) An effective wagering plan designed to build a bankroll by placing strictly WIN bets;

3) A tangible advantage to capitalize on over the long term;

Then, simply play the legitimate win contender with the highest win probability in every race, bet to WIN, whenever said contender is offered on the tote board at overlaid odds, fair odds, or odds greater than the wager bifurcation point; in the alternative, whenever a contender's odds reach the bifurcation point, pass the race.

The Favorite-Longshot Bias

Betting odds provide biased estimates as to the probability of a horse winning.  In other words, every day at thoroughbred racetracks all over America, longshots are systematically overbet while favorites are consistently underbet.

Known as the favorite-longshot bias, studies have attributed this tendency to bet against the favorite, which is common among public bettors; to either risk lovers or those who are simply incorrectly informed as to the true win probability of a horse.

This well documented empirical fact represents an important deviation because it creates a margin of error between the true probability of a horse winning and the win probability estimated by crowd consensus as reflected by the odds on the tote board.  The consensus of the crowd is to some degree in error when it comes to win probability, and this creates an opportunity for a skilled player to capitalize on that mistake; with methodical play, rigorous discipline and a well thought out plan, utilizing the Law of Large Numbers to create wealth over time in the same manner as casinos.

Data Driven Decision Making

Probability theory is essential to activities involving quantitative analysis of data and complex systems given only partial knowledge of their state, such as in a horse race.

Subjective Probability

The win probability reflected by the odds on the tote board is of a subjective nature, which is to say, the collective decision making process involved in reaching the equilibrium point of public concensus is largeley heuristic (human).  Wherein a great majority of players may utilize some method of data analysis, yet the decision is largely based on a person's estimate or intuition; for instance, a belief that since the favorite has won in the last three races, a longshot must win this race (the gambler's fallacy).

Objective Probability

By contrast, objective probabilities are a more accurate way to determine the probability of a given outcome, the decision making process is based upon recorded observations or a history of collected data.  Accomplished by establishing some prior probability, which is then updated to a posterior probability in the light of new, relevant data; broadly speaking, an objective view that probability can be interpreted as an extension of logic.  An objective probability will examine past data and use mathematical equations involving the data to determine the likelihood of an event.

We refer to the method described herein for wagering on horse races as parimutuel investment for two reasons:

(1) The decision making process is non-hueristic, but rather, based upon an objective probability which is supported by the data.  An algorithmset determines the contender with the highest probability of winning together with its fair odds and wager bifurcation point.  The player either bets to WIN at odds which are greater than the bifurcation point, or else, passes any race in which the odds reach the bifurcation point; the human element is effectively replaced with a random (stochastic) process.

(2) A spin of the wheel is inconsequential.  Allowing the data to decide provides many advantages but most importantly, it removes the speculation, thus carrying the player out of the gambling realm; into a paradigm where objective probability tends toward an expected value or point of equilibrium.  The player is no longer concerned about the outcome of any single race, methodically playing the most probable winner in every race; to attain an expected rate of return, as the probabilities converge to their expected value over time. 

CU@the$Window!

thoroughbredclass01

Totalizator Board

Thoroughbred Racing at the Great Race Place
THE QUESTION: To Bet or Not to Bet

The tote board is a random self organizing system that comes alive as it channels the crowd's energy, armed with knowledge of the Fair Odds (after the racetrack takeout) for each horse in the race; horses offering overlaid odds are readily identified.

Playing overlays is the name of the game and it's a dynamic process, the tote board is alive right up until the start of the race and even while the race is running as the on-line wagers are closed, accounted for and aggregated to the pool.  Thus in order to be as certain as possible about the price of an overlay on the tote board, horse players should place wagers as late as possible, one or two minutes prior to post time.

Due to the late action on the tote board, at times an overlay will be borderline and may not end up as an overlay.  If there's any chance the odds will come down to the point where your WIN ticket will not be a play on overlay, it is best to either abandon the play in favor of another "possible overlay" or pass.

Also keep in mind that a favorite can go beyond the wager bifurccation point in the same way.  Likewise, if there is a chance that a play might go beyond the bifurcation point after you purchase the ticket, then it's better to pass the race; one should not force it and hope for the best, there are too many races.  Strike rate, strike rate, strike rate, when in doubt pass the race; keeping a higher strike rate will maximize long term profit.

New fans, just remember the overlay selection process, always play the overlaid WIN contender with the highest TRUECLASS-TODAY rating; because that will be the one with the highest probability of winning.

CU@the$window!