Looking at odds in a horse race

Many punters think that analysing form in Horse Racing betting is to do with identifying winners when in fact this is not the real reason why you should analyse form and data. To better understand why let us look at an analogy where I told you that I was going to place 20 balls into a bag of different colours. I then gave you odds so that you could bet on the outcome of which colours were drawn out if you reached into the bag blindfolded and pulled a ball out. Beforehand I would obviously give you a list of colours so that you could pick one.

Now it would be obvious here that you would be betting without any clear indication of what the true odds should be as you do not know the relative numbers of different coloured balls in the bag. But now let us take this into another phase where a punter has done their homework and has found that out of those 20 balls……10 are red….4 are white…..2 are blue…..2 are green and 2 are black.

Now what this analysis has done is identify the likely winner which in this case is red as there are 2.5x the number of red balls than the next highest colour which is white. So if we had to bet on which colour would be likely to appear then the bet would need to be on red above any other colour. But in betting then this does us little use for the following important reason! The bookmakers are setting the prices and so you will probably be receiving smaller odds than the event actually happening.

If we look at what the true odds should be in this analogy then we simply convert the number of balls to a percentage and then to odds. There are ten red balls which equates to a 50% chance of red appearing…..50% in odds form is Even money. There are four white balls out of twenty which is 20%…..expressed as odds then this is 4/1. A brief summary of the remaining three colours shows that there are two of each which equate to 10% per ball and 10% in odds is 9/1.

So the true odds of red are Evens, white is 4/1 and the rest are 9/1 each. But what if we looked at the prices that a bookmaker was giving us and he was offering 4/6 on red? Suddenly it appears that a bet on red is not such a great proposition after all as the odds do not reflect the chances of red appearing. Continuing to bet on red at those odds would lead to long term losses. But what if the second favourite was being offered at odds of 6/1? This now represents value as even though the white ball is less likely to appear than the red, as a betting proposition then it is a far better bet as it has the potential for long term profits.