Horse racing: laying false favourites (strategy for laying horse racing favourites that are under- priced and do not have as good of a chance winning as the odds suggest)
Betting exchanges have been a great invention. They have enabled your average Joe to strike bets on horses to lose (lay bets), much in the same way that the traditional bookmakers have done for centuries. As the bookmakers are the ones who generate significant profits year on year, common sense dictates it is a shrewd move to follow the practices of the traditional firms. Betting on outsiders to lose is a strategy that can result in long winning streaks, however when that 50/1 outsider defies all logic and recent form, bolting up, the betting bank can quickly vanish.
Instead, laying false favourites is a lower risk strategy which can produce more consistent long term returns. False favourites are horses whose odds do not accurately reflect their chance of success, with the market having the horses priced up at shorter odds than they should be. But just how do you pick a false favourite?
False favourites come in numerous guises. Their incorrect odds can often be the basis of reputation, jockeys, connections and tipsters. We take a look at each individually:
Some horses often start races off at artificial odds due to their reputation. A first time out 2yo or 3yo that has been well touted in the Racing Post, may attract a lot of money and be favourite. However, delving deeper, we find that the trainer only has a 4% strike rate with the newcomers, and the sire is even worse, with its offspring winning just 3% of the time on their first racecourse visit. Based on these stats, the horse does not justify its position being so short.
Punter mindset can play a big role on the odds of a horse. Anything ridden by Frankie Dettori, or Tony McCoy is sure to attract money in the betting shops in the morning. The bookmakers will have liabilities on these runners and so will bet into the betting exchanges to reduce the odds of the horse and thus limit their potential losses. Consequently, horses ridden by these jockeys will tend to be under-priced.
Certain connections (owners/trainers and those associated with a horse) have a fear factor with bookies and punters. Any hint of support for one of their runners is often met with market overreaction. Also some trainers see their runners through rose tinted glasses, will give positive reports and back the horses, but the results are not as good as they hope. For example, Charles Hills favourites are 54/187 (29%) for loss of -£52 when backed to £1 level stakes. Expected winners 67. His horses only win 80% of the races they should do and often make good false favourites.
Tipster's selections make some great false favourites. Those who have a good following will often crash the odds of a horse due to sheer weight of money. The amount bet on a horse reduces its price, but does not increase its chance of success. Great false favourite.
Once you have identified what you believe to be a false favourite, the next step is how to implement a strategy to maximise profits. A fixed stake strategy can be chosen when laying favourites, as the liability of losing is unlikely to be significant. As a rule of thumb, the lay stake should be around 1% of the betting bank to ensure that any anomalous run of results does not leave you broke. At the end of each month, check your betting bank and whatever it is, change the lay stake to 1% of that figure. If you are accurately able to determine horses that may be false favourites and make a profit, this form of ratchet staking will see your profits grow exponentially.
When selecting a betting exchange, you want one that offers low commission rates (so you keep most of your profits) and one that does not penalise winners. Smarkets believe that winners should be rewarded with low commission rates for their loyalty and this up and coming betting exchange is getting positive reviews. Increasing liquidity and number of markets make Betfair a great place to profit from laying false favourites.