The Edge and Outlay Risk Management (Getting Serious Now!)
A punter’s expected return from gambling should be zero or less.
For example, the expected return from betting heads at even money on 100,000 coin flips is zero. Without an edge’, the punter cannot raise the expected return above zero. The edge constitutes a greater amount of information that other betting participants have overlooked (insider information is also an ‘edge’ in stock markets and gambling, but obviously this is illegal). In many cases, such as the flip of a coin, the edge does not exist deeming any betting participation as futile.
In greyhound racing, an edge might be gained from analysing the form guide at length (handicapping) or even employing a professional tipping service. On course, Wentworth Park subscribes to the tipping services of the curiously named Giddy-Up which is designed largely to provide theoretical prices for each runner (rather than clear cut race winners) and speed maps. If punters can secure better odds than their model predicts, they may have an edge. The service is located on screens in the bookmakers betting ring.
If a punter believes a greyhound is paying overs (a price greater than their estimated price the greyhound should be running at), the punter should then calculate what percentage of their bankroll should be gambled on the runner. This is largely overlooked by most racetrack followers. It is what we refer to as the Risk Management process or Stage 2 of the betting process.
A system developed by John Kelly over 50 years ago is possibly the most popular calculation used by professional gamblers (and investment funds for that matter) to determine the optimal outlay based on the estimated probability of winning and prices available. Whilst the original Kelly paper detailing how the formula was derived will be too difficult for most readers to understand, the end formula is quite simply:
d = decimal odds available (eg $4.50)
We provide an example excel spreadsheet below and recommend readers experiment with inputs to get a feel for the model.
The main caveat with the system, and any modelling system, is that the data input (the edge) needs to be reasonably accurate. Garbage in, Garbage Out!
We believe the Giddy Up service provides adequate speed maps and pricing for each runner that punters can use as a starting point to help gain an edge. It perhaps works best when Giddy Ups second and third favourites are mispriced by the market because too much money is directed at the favourite.
An example of the Giddy Up screen is shown below. In this example, the fixed odds available for Black Magic Opal are slightly above the Giddy-Up estimate. The Kelly model would suggest ~13% of the bankroll be placed on Black Magic Opal at $1.90.
For more optimal results, the system would likely work better if two parties manage it, one providing the probabilities of winning and the other (the Risk Manager) entering the data inputs and executing the bet. This is because the formula can produce outlay amounts that may not be intuitive, especially should your bankroll grow and the outlays for each bet become much bigger. The model will also produce wild swings in balances that can throw a punters confidence in the system, setting back punters or producing significant short term growth that instils an unrealistic level of confidence in the system which subsequently distorts future inputs.
It will also produce many “no bet” recommendations (i.e. don’t bet on the race as there is no edge) when the betting odds on offer do not exceed the minimum required. When this occurs, punters can lack the discipline required and either ignore the recommendation or revise their probability inputs so that a bet can be made.
Alternatively, punters can lay the favourite using Ladbrokes. In this instance, if you estimate the probability of a greyhound winning is 35%, then your probability of it LOSING is automatically 65%. If the odds to lay the favorite (Favourite vrs Field in Ladbrokes) is greater than $1.54 (1/probability), you determine how much to outlay using the Kelly Formula and hit it!
An example excel spreadsheet model of the Kelly Formula can be downloaded here.
How do greyhounds pick their winners?
5 Tips to Identify a Winning Bet for Greyhound Racing
How often does the Favourite place in greyhound racing?
While favourites may win only 30 out of every 100 races, they do run in the first three placegetters many more times. Recent figures show them figuring in the first three placings about in 60 out of 100 races.
By slowing a dog, a trainer can lengthen the odds on it. Then, once it has been categorised as a long shot, the dog can run without drugs, vastly increasing its chances of winning. This is race-fixing and is illegal.
Betfair Trading – Back the favourite greyhound | testing on different winning cycles
Youve decided to have a night at the Doggies and want to enjoy a little flutter on the next race. The only problem is you want to bet small, have no idea how to place a bet, what all these numbers mean, and have heard of but never understood what a trifecta is. Oh, and you want to know how to select a winner! READ ON