When Kenny Rogers sang about knowing when to hold ‘em and when to fold ‘em, he was referring to the percentage play in poker: which hands should you look to maximise your position from and which should you walk away from altogether.
There are interesting parallels between ‘The Gambler’ and betting on sports, because the key to long-term success when punting on football, horse racing or any other sport is knowing when you find yourself in a value position and when you don’t.
There are three possible outcomes in a football match, and the bookmakers price up each in a way that a) protects their bottom line and b) enables them to build in a profit margin. Their odds are also determined by a desire not to over-expose themselves should a favourite hose up and win comfortably.
In horse racing, there’s only one possible winner, and while due care and attention is paid when pricing up the market to avoid laying too many each way punts, again the object is to protect and benefit.
Once you understand this ambition, you get a better handle on whether to bet on favourites, outsiders or another selection. The object is to bet on outcomes you believe have a greater chance of winning than their odds imply – no matter what their status in the market.
Betting on Favourites
In theory, betting on favourites is the way to go – logic dictates that this team, horse or player are the more likely victor because a) the bookies’ analysts have determined so and b) the weight of betting money coming in has confirmed the fact.
But how often do the odds you take on a favourite reflect their actual probability of winning? How much have the bookies skewed their margin in order to protect themselves from a heavy loss?
Let’s take a look at the results of the 2023 Cheltenham Festival as a guide. Let’s say you had decided to bet on every favourite, with win only wagers placed on those 3/1 or shorter and each way punts for those at longer prices. Let’s go with £10 stakes for each (£5 e/w).
After day one, here’s your position:
- Facile Vega (9/4) – lost – -£10
- El Fabiolo (11/10) – won – £11
- Corach Rambler (6/1) – won – £36
- Constitution Hill (4/11) – won – £3.64
- Honeysuckle (9/4) – won – £22.50
- Tekao (3/1) – lost – -£10
- Gaillard Du Mesnil (10/11) – won – £9.09
What a day! Five favourites won, securing a handsome payday for punters (£62.23 from £10 stakes in this case) and walloping the bookies. A strike rate of 71% is the stuff of legend.
And that’s the key to betting on favourites. Because the odds you are taking are so low, you really do need that strike rate to be high in order to turn a profit – if you place ten bets at odds of 1/2, for example, you need seven of them to win in order to go beyond break even or a loss.
The issue with betting on favourites is that if your strike rate does dip, it becomes very hard to make money wagering on the market principle blindly. To continue the Cheltenham theme, if you’d followed the same pattern for days 2-4 as described above, your results would have been -£10.30 (day two), -£61.50 (day three) and -£19.50 (day four).
All told, that’s a loss of £29.07 across the four days from blindly betting on favourites at the Cheltenham Festival; even after such a dreamy first day.
This is only a small sample, of course, but you can see how a downturn in strike rate will have a significant impact upon your profitability. There will be times when there’s a ‘value’ favourite, i.e. where their chance of winning is greater than their odds based upon various factors, but betting blindly on the FAV is not an option that can be described as savvy.
Betting on Outsiders
So if betting on favourites is not a profitable exercise, then the reasoning would suggest that wagering on outsiders is therefore the smarter way to go, right?
The answer is a resounding no.
Erik Snowberg and Justin Wolfers are two academics in America that studied the betting markets and results of more than six million horse races stateside – now that’s a sample size we can truly believe in.
Their findings were conclusive: betting blindly on the favourite resulted in a loss of 5.5%. Betting on next best horses in the range 3/1 and 15/1 yielded a loss of 18%. Betting on those categorised as outsiders and priced at 100/1 and longer saw an eye-popping loss of 61%.
The notion that betting on higher odds will yield greater returns can be emphatically put to bet, even with the lower strike rate required to turn a profit.
If you took these findings as read you might never place a bet again, but the truth, as mentioned, is that the best bets to place are those that represent good value – those rare occasions where the bookies have under-priced a selection. It doesn’t matter if that’s a favourite, an outsider or something in-between.
Dutching Outsiders
As you may know, betting odds reflect the implied probability of something happening. So, if a selection is even money, the numbers suggest there’s a 50% chance of that landing.
In that fashion, if you bet on a horse in the Grand National at 50/1, it has just a 2% implied probability of winning; assuming that the odds are accurate in assessing the horse’s form, handicap and quality.
So by Dutching selections together, we can actually increase our ‘win probability’ while maintaining profitability should any of our picks oblige.
Here’s an example using the Grand National odds via Betfair Exchange’s Dutching tool:
Using a £10 total stake, we are able to split up our bets across four horses and yield a return of around £42 no matter which of our selections lands. It spreads our risk, increases our implied probability of betting and yet we are able to keep our outlay to a sensible amount.
This is an example of fixed return Dutching.
But let’s say we fancied two of our four horses more than the others:
With a more selective staking plan, we can increase our potential return on our most fancied horse while scoring a win if either of our other three picks do the business.
There are Dutching calculators easily accessible via a Google search, so if you do have a fondness for betting on outsiders or long-odds picks this could be a way for you to indulge your interest while increasing your chances of winning.