There is an old saying in warfare and it is “know thy enemy”. In horse racing then our enemy is the bookmaker and to make money then we have to know how they operate and how they make money. Novice punters believe that there is value simply backing prices blindly through form analysis. This is incorrect and the betting industry utilises the services of professional odds compilers whose job it is to figure the correct probabilities of each horse winning. Then this can be converted into odds.
The bookmaker finds the correct probability and converts that to odds and then shaves a piece off for himself and this when added together comprises the “overround”. This is the amount of theoretical profit that a bookmaker can make from the race if they can lay off all of the horses to lose similar amounts. So trying to defeat them by analysing races better than them is very difficult. You may know more about analysis than the bookmaker but they don’t need to know because the entire market “knows”.
So in order to make money then we have to come at this from a different angle and that angle is one of understanding why the bookmakers would deliberately price something up incorrectly. This can happen with horses that are hyped and they can be bet beyond their theoretical price levels. When this happens then the value comes from opposing the favourite and not by backing it. Betting firms love nothing better than mugs that back something at Evens when it really should be 11/8 or more.
Often you will see huge plunges just before the race and often these plunges are manufactured by a very small number of people. More and more punters then pile into the price and suddenly we have a price that is totally out of sync with its theoretically optimal price level. So do not assume that the bookmakers’ prices are always right and they themselves will be aware of when their prices are wrong. However if they are wrong then they will be deliberately wrong and not accidentally wrong.
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