To be truly viable, a system must provide a large number of high advantage betting opportunities in order that a sufficient amount of expected profit can be generated. An approach which does promise to provide a large number of betting opportunities is to fundamentally handicap each race, that is, to empirically assess each horse’s chance of winning, and utilize that assessment to find profitable wagering opportunities. A natural way to attempt to do this is to develop a computer model to estimate each horse’s probability of winning and calculate the appropriate amount to wager.
William Benter, “Computer Based Horse Race Handicapping and Wagering Systems: A Report”
But as we said back in 2020, you aren’t betting horses. Let’s dismantle this statement by Benter:
1.) To be truly viable, a system must provide a large number of high advantage betting opportunities in order that a sufficient amount of expected profit can be generated.
This has been our experience. We use a fractional Kelly system with which we allocate a prudent sum to several simultaneous bets in order to reliably achieve a sufficient amount of expected profit.
2.) An approach which does promise to provide a large number of betting opportunities is to fundamentally handicap each race, that is, to empirically assess each horse’s chance of winning, and utilize that assessment to find profitable wagering opportunities.
For us, this has not proven true. A strictly fundamental model is not a high probability means by which to beat the opposition on an intraday basis and for the following reason, best related by Benter: “If the races are largely dishonest, and the public odds are dominated by inside information, then it is unlikely that a fundamental model will perform well. Even if the racing is honest, if the general public skill level is high, or if some well-financed minority is skillful, then the relative advantage obtainable will be less. Particularly unfavorable is the presence of other computer handicappers.”
Where are the edges if one is seemingly trapped between a well-financed minority, the general public and inside information?
The answer: Where the market has overpriced the odds of continued loss; where consensus estimation errors indicate betting odds are considerably worse than they actually are.
Necessarily, in any given stock, Advantage Bets that stem from instances when the market has overpriced the odds of continued loss occur rarely. Hence, in order to generate a sufficient amount of expected profit, right-sized bets must be taken in several stocks at once.
3.) A natural way to attempt to do this is to develop a computer model to estimate each horse’s probability of winning and calculate the appropriate amount to wager.
A computer model is essential, but models are not without risk, as one or several computer handicappers with models highly correlated with one’s own may start to play. This has the effect of blunting one’s edge. One must aim to do things differently; a model must be as uncorrelated with one’s competitor’s as possible.
We are in our umpteenth iteration of the Value Betting Engine (a.k.a. Odds Engine) that we debuted back in February 2020. Its source code has been drastically improved in the intervening years, as has our application of it, all thanks being to our Lord and Savior Jesus Christ. I know we would not have enjoyed continuous breakthroughs were it not for the work of the Holy Spirit.
In the last few months, we have systematically exited bets with sub-optimal pool sizes. In other words, we have ceased to trade issues with exceptionally low daily volume, which in turn exhibit volatile betting odds. More specifically, although an Advantage Bet may be valid, the likelihood of concluding the bet at one’s expected profit level is uncertain in the face of a dearth of offers.
We have also ceased to specialize in precious metals and precious metals miners, as there were too few daily advantage betting opportunities in such a narrow slice of the market.
Finally, I will often post about stocks in which we have placed, or plan to place, advantage bets, but in order to preserve our intraday edges, I have removed our page devoted to current fund holdings.
In the future, computer handicappers may become more numerous, or one of the racing publications may start publishing competent computer ratings of the horses, either of which will likely cause the market to become efficient to such predictions. The profits have gone, and will go, to those who are ‘in action’ first with sophisticated models.
William Benter, “Computer Based Horse Race Handicapping and Wagering Systems: A Report”
