Pricing Up a Market

Developing a Percentage Probability

For the purposes of this article, though, just remember that dividing 1 by the odds tells you the likelihood of an event happening. So if a horse is $3.00, it means the market is saying that it has a 33% chance of winning ((1/$3.00) x 100).

If we take horse racing as an example, the easiest way to start pricing up a race is to decide which horse should be favourite.  There are various ways to do this. You might use some kind of rating system – handicap or speed – or a more general understanding of past form.

Whatever information you favour, once you have made your assessment, try asking yourself the question: if this race were run 100 times, how many times would Horse A win? And remember, the answer is very unlikely to be 100.

By identifying your assessed probability of a runner in a race, you in-turn identify the fair price. If you’ve assessed a horse as winning a race 25 times from 100 races (25% of the time) you have then determined the true price of this horse to be $4.00 (1/0.25).

Asking this question, rather than trying to think about what horse will win, can do wonders for shifting your mindset from being a punter who seeks winners, to a punter who seeks value.

Focus on the Favourite

Once you have an idea of the favourite, move on to the second favourite, and so on. Most people find that, in the early stages of creating a tissue, constant readjustment is required as you consider new factors. Softer-than-ideal ground for one horse, a collateral form boost for another, a liking of big fields for another: numerous reasons will see you move the various chances of your first few horses up and down.

Usually, once you have decided on which horses should head the market, the rest fall into place more easily behind.

Now convert the percentage chances you have into odds [((1/40%) x 100) = $2.50] and then go and look at the market. If there is a horse with odds that are higher in the Betfair market than you have it priced at, then you may have found yourself a value bet.

If there are significant variations, of course, it might be worth asking yourself what you have missed. Does the market know something that you don’t?

Issues with Assessing the Full Card

If you’re struggling to assess the percentage chance of each horse with any certainty, then at least try to put the runners in to a pecking order of most likely to least likely. If your favourite is different from the markets, even this very basic approach can yield a value bet.

How accurate your tissue prices are will depend, of course, on how good you are at assessing the information you have about the runners in a race. That is why most successful punters rely on some kind of quantitative method – like speed ratings – to give themselves an unbiased starting point from which to price up a race.

Pricing Up Other Events

In other sports, creating a tissue can be much easier, as there are usually fewer possible outcomes. In soccer, for example, there are only three.

Having said that, soccer is slightly complicated by the concept of home advantage. For example, in the English Premiership, teams playing at home win, on average, around 40% of matches, with away teams winning around 30%, and 20% of matches ending in a draw.

This complication can be quite useful, though. Knowing the home field advantage for your sport means an initial tissue is already created for you. In the case of the English Premiership you know that the home team needs to start at 2.50 [((1/40%) x 100) =2.50] and you can then adjust from there based on their past form and team news. Just keep the same question in your mind: “if this match was played 100 times, how often would the home team win?”

Other Pricing Considerations

Different punters will adopt different approaches to pricing up a market. Some will only ever concentrate on the first two or three in the betting, while others will assess the whole field. Some will spend a lot of time getting the favourite in a contest as accurate as possible, before moving on. Others will very quickly go through a market assigning odds on a “gut feel”, before going through a number of readjustments.

Some only use rating systems to create their tissues – whether handicap ratings in horse racing or Elo ratings in soccer – and others rely more on their own knowledge of past form and what it is worth.

Some will give precise odds to an outcome, whereas others may instead go for a range of odds – for example, saying that the home team should be between 2.60 and 2.90.

The advantage of the last approach is that it recognises that pricing up a market is not an exact science. The tissue you create is only as good as the information on which you base the odds. Having said that, most successful punters will make sure that they have their own idea of the odds before they check out what others’ views of the odds should be.

If you’re serious about making your punting profitable, assigning a price to your investments should be a disciplined habit that you adopt.