Testing Overlays

[lansdale]

Originally Posted by JerryBoyle

I've been struggling with this as of late. I've attached some charts of cumulative profit for a model I backtested. First image is a cumulative profit chart that I was proud of, which covers ~3000 races from 20160201 to 20170501. Utilized kelly betting with a fixed $1k bankroll at the start of each race (no reinvestment). Second attachment is the same model from 20170901 to 20180301. I agree that 500 bets may not be enough...

I think it comes down to having a good way to evaluate how much better our predictions are doing than the publics. No strategy is going to last forever, as we're only winning when we're doing something that no one else is. It has taught me that having a way to i.d when to turn a strategy off is as valuable as i.d'ing the strategy in the first place.

Your performance in the first chart is spectacular, and the contrast with the second suggests that you were either playing different tracks or different types of races. But, I would give more weight to the first since it's more than twice the size of the second and more than twice the length of time -- the second chart appears to cover only six months of play. One explanation that strikes me is that the second chart covers mainly winter racing, when handicapping opportunities are much worse in many places. If you're simply playing on the same tracks which are less congenial to your model during winter months, you either need to play elsewhere or simply not play.

Your instinct that 500 races is too small a sample to be meaningful is correct -- read Dave. S.'s post above -- he's right. Also, very much worth reading Benter's article on building statistical models for horseracing -- he also claims he saw very little variance in the performance of his model after 2,500 races. As I've said before, this appears to be the minimum 'long-run' of horseracing -- for blackjack and poker the relevant number of trials is much higher.

Most important thought, is what you mean when you say you're Kelly betting. How are you determining your Kelly bet size? As you probably know, Kelly betting can often produce a roller-coaster-like ride, which many gamblers prefer to avoid. That also could explain the huge swing you experienced here. I could be wrong, but you might be better off with flat-betting -- which can also be profitable. But, bottom line, I would take that first chart very seriously -- I think you really have something there.

Cheers,

lansdale

Anohttps://www.channel4.com/news/data-democracy-and-dirty-tricks-cambridge-analytica-uncovered-investigation-expose

[pandy]

Thaskalos mentioned the mental aspect of only betting horses 6-1 or higher. I don't disagree when you play a mixture of odds and include favorites, you cash a lot more tickets, and although the ROI may be lower, if you can still grind out a profit, albeit smaller profit, psychologically, that's a lot less stressful. My point about ROI was that it tends to be higher when you avoid favorites. From a purely mathematical viewpoint, over the long run, favorites bring down your ROI. I also think it's tougher than ever to find overlays that are below 5-2 odds. And even if you do, the profit margin is slim. On win bets, if you can generate a consistent 1% profit on horses below 5-2, you're a master handicapper. Every test I've ever run has shown that it's virtually impossible to generate a long-term profit betting favorites to win.

[steveb]

Originally Posted by pandy

Thaskalos mentioned the mental aspect of only betting horses 6-1 or higher. I don't disagree when you play a mixture of odds and include favorites, you cash a lot more tickets, and although the ROI may be lower, if you can still grind out a profit, albeit smaller profit, psychologically, that's a lot less stressful. My point about ROI was that it tends to be higher when you avoid favorites. From a purely mathematical viewpoint, over the long run, favorites bring down your ROI. I also think it's tougher than ever to find overlays that are below 5-2 odds. And even if you do, the profit margin is slim. On win bets, if you can generate a consistent 1% profit on horses below 5-2, you're a master handicapper. Every test I've ever run has shown that it's virtually impossible to generate a long-term profit betting favorites to win.

i can't see how that is correct.

favourites would likely have you losing less overall than longer prices would.
the favouriites would tend to be closer to their 'true' odds, and the roughies would tend to salute far less often than their public probs suggest they should.

but a player that had a sound methodology, would trust that over whatever the public says, so that the public odds would play no(or minor) part in his/her thinking.

the public may well be right overall, but they are also very very often miles out.
the variance is huge.

[pandy]

Originally Posted by steveb

i can't see how that is correct.

favourites would likely have you losing less overall than longer prices would.
the favouriites would tend to be closer to their 'true' odds, and the roughies would tend to salute far less often than their public probs suggest they should.

but a player that had a sound methodology, would trust that over whatever the public says, so that the public odds would play no(or minor) part in his/her thinking.

the public may well be right overall, but they are also very very often miles out.
the variance is huge.

Sometimes you'll see stats comparing the ROI on thousands of favorites to horses at various odds, and the very high odds have a very low ROI. But that's random, using every horse. Longshots that have very little chance to win aren't hard to eliminate. Those type of stats based on "all" horses at certain odds are not relevant.

Again, from a mathematical viewpoint, the takeout is just too high to overcome when betting favorites to win, and the rebates are too low on win bets, so even if you bet through a rebate house, it doesn't help enough.

And I'm not recommending bets on horses that are 40-1. 6-1 to 20-1 is a good range, or even 5-2 to 20-1, or 4-1 to 20-1. Once you go below 5-2 odds, on win bets, it's almost impossible to show a profit on those bets.

[PaceAdvantage]

Originally Posted by lansdale

Your performance in the first chart is spectacular, and the contrast with the second suggests that you were either playing different tracks or different types of races.

Some of the drawdowns in that first chart would have sent the less hearty among us scurrying for the exits long before we gave it a chance to pan out over the next billion races...

[GBL]

Originally Posted by pandy

Sometimes you'll see stats comparing the ROI on thousands of favorites to horses at various odds, and the very high odds have a very low ROI. But that's random, using every horse. Longshots that have very little chance to win aren't hard to eliminate. Those type of stats based on "all" horses at certain odds are not relevant.

Again, from a mathematical viewpoint, the takeout is just too high to overcome when betting favorites to win, and the rebates are too low on win bets, so even if you bet through a rebate house, it doesn't help enough.

And I'm not recommending bets on horses that are 40-1. 6-1 to 20-1 is a good range, or even 5-2 to 20-1, or 4-1 to 20-1. Once you go below 5-2 odds, on win bets, it's almost impossible to show a profit on those bets.

As you might've understood already, I am a believer of mixed-odds with an overall good hit ratio. They both complement my ROI purposes. One thing I certainly don't do is bet odds-on no matter how strong they look. The lowest I can go is probably 8/5. But that's not the point.

The problem with any ROI win-statistics is they're based on $2 flat win bet regardless of odds. That's good for statistical purposes but hardly practical.

In my case, if I like 2/1 favorite (which I think should've been 7/5), I bet HEAVY. Actually, much heavier. For example, if I generally play $20 win on a 12/1, I probably would go 10 times more on a 5/2. Similarly, if I really love an 8/1, I don't restrict myself to any fixed amount rather try to go as heavy as I think feasible.

Isn't it that's how we all play?

[CincyHorseplayer]

I think what Pandy is saying is that odds are merely a point of departure not an end in itself. A certain odds range puts you in the neighborhood of profitable expectation. Being tote board dependent and a prisoner of the true odds concept is not remotely the same thing. And not only that with win betting you are not only at the mercy of the tote board but a single outcome. They win or lose. I use the odds as merely a gauge for a potential play. And payoffs as validation or not. Heavy favorites or even 5/2 good things can still drag down all the payoffs attached to them. But there are plenty of 2 horses races that have 5/2 and 2-1 shots that aren't being hammered in exotics that are playable. In my own play since December the return on my bets is a touch above 7.50-1. 2/3rds of my play is exotics to 1/3rd win. Win bet profits can evaporate quickly by even a mildly bad run. Being married to a single outcome and also when favorites at multiple tracks go on a rampage it is unavoidable. Having up to 6 outcomes that yield a higher odds return is less volatile. If you aren't getting payoff validation you pass. Pretty basic IMO.

[pandy]

Originally Posted by GBL

As you might've understood already, I am a believer of mixed-odds with an overall good hit ratio. They both complement my ROI purposes. One thing I certainly don't do is bet odds-on no matter how strong they look. The lowest I can go is probably 8/5. But that's not the point.

The problem with any ROI win-statistics is they're based on $2 flat win bet regardless of odds. That's good for statistical purposes but hardly practical.

In my case, if I like 2/1 favorite (which I think should've been 7/5), I bet HEAVY. Actually, much heavier. For example, if I generally play $20 win on a 12/1, I probably would go 10 times more on a 5/2. Similarly, if I really love an 8/1, I don't restrict myself to any fixed amount rather try to go as heavy as I think feasible.

Isn't it that's how we all play?

I usually bet heavier on longshots. First of all, I agree with you that you should have some sort of cut off point. You say that you prefer at least 8-5 odds. I would say that making win bets on thoroughbreds who are below 8-5 odds is a losing proposition, so why bother? But horses that are 8-5 to 2-1, also almost impossible to generate a profit on a win bet, and not easy in exactas, either.

I bet heavier on the higher odds horses because I can't get that excited about the lower odds horses. And, in my case, I know that longshots generate my profit, so naturally, I bet more on them.

[PaceAdvantage]

Shouldn't you be betting more on your largest overlays regardless of what their tote odds are?

In fact, the lower the odds, the more you can bet on overlays in that range.

[GBL]

Originally Posted by pandy

I usually bet heavier on longshots. First of all, I agree with you that you should have some sort of cut off point. You say that you prefer at least 8-5 odds. I would say that making win bets on thoroughbreds who are below 8-5 odds is a losing proposition, so why bother? But horses that are 8-5 to 2-1, also almost impossible to generate a profit on a win bet, and not easy in exactas, either.

I bet heavier on the higher odds horses because I can't get that excited about the lower odds horses. And, in my case, I know that longshots generate my profit, so naturally, I bet more on them.

Isn't it interesting how we all reach our goals taking very different routes and using different methodologies?

There's never a single and only way to success :-)

[GBL]

Originally Posted by PaceAdvantage

Shouldn't you be betting more on your largest overlays regardless of what their tote odds are?

In fact, the lower the odds, the more you can bet on overlays in that range.

I would say there's no hard and fast rule here. It all depends upon how strongly I feel. Adaptability, open mind, and flexibility has done me good, so far.

[classhandicapper]

Originally Posted by steveb

i can't see how that is correct.

favourites would likely have you losing less overall than longer prices would.
the favouriites would tend to be closer to their 'true' odds, and the roughies would tend to salute far less often than their public probs suggest they should.

but a player that had a sound methodology, would trust that over whatever the public says, so that the public odds would play no(or minor) part in his/her thinking.

the public may well be right overall, but they are also very very often miles out.
the variance is huge.

This is an example of the theory vs. reality problem I brought up earlier.

You would think it would be easier to find value among the group of horses that's losing less per dollar wagered than a group that's losing a lot more (favorites vs. longshots). The problem is that there are apparently more individual large errors among mid priced horse and perhaps longshots than there are among favorites. Even if you are pretty good at identifying the occasional very bad favorite, the remainder is a tough nut to crack. I'm sure there are people that can do it if they are selective, but the ROI on favorites is not going to be impressive unless perhaps you get ridiculously selective.

Another way of thinking about it is this.

If a horse is already below 5/2, what are the chances you know something "positive enough" about it that everyone else doesn't already know to overcome the take.

[pandy]

Originally Posted by classhandicapper

This is an example of theory vs. reality that I brought up earlier.

You would think it would be easier to find value among the group of horses that's losing less per dollar wagered than a group that's losing a lot more (favorites vs. longshots). The problem is that there are apparently more individual large errors among mid priced horse and perhaps longshots than there are among favorites. Even if you are pretty good at identifying the occasional very bad favorite, the remainder is a tough nut to crack. I'm sure there are people that can do it if they are selective, but the ROI on favorites is not going to be impressive unless perhaps you get ridiculously selective.

I agree. When I bet favorites, I would sometimes get on a roll and click off four or five winners in a row, and maybe 8 winners in 11 bets. Wow, easy money! But invariably, the law of averages caught up and suddenly I lost four bets in a row and 8 of my next 11 bets on horses that looked so strong on paper, and there goes the profit. With double digit horses, there's more leverage and the big hits you can put together make up for a lot of losers.

[storyline]

Originally Posted by lansdale

Your performance in the first chart is spectacular, and the contrast with the second suggests that you were either playing different tracks or different types of races. But, I would give more weight to the first since it's more than twice the size of the second and more than twice the length of time -- the second chart appears to cover only six months of play. One explanation that strikes me is that the second chart covers mainly winter racing, when handicapping opportunities are much worse in many places. If you're simply playing on the same tracks which are less congenial to your model during winter months, you either need to play elsewhere or simply not play.

Your instinct that 500 races is too small a sample to be meaningful is correct -- read Dave. S.'s post above -- he's right. Also, very much worth reading Benter's article on building statistical models for horseracing -- he also claims he saw very little variance in the performance of his model after 2,500 races. As I've said before, this appears to be the minimum 'long-run' of horseracing -- for blackjack and poker the relevant number of trials is much higher.

Most important thought, is what you mean when you say you're Kelly betting. How are you determining your Kelly bet size? As you probably know, Kelly betting can often produce a roller-coaster-like ride, which many gamblers prefer to avoid. That also could explain the huge swing you experienced here. I could be wrong, but you might be better off with flat-betting -- which can also be profitable. But, bottom line, I would take that first chart very seriously -- I think you really have something there.

Cheers,

lansdale

Anohttps://www.channel4.com/news/data-democracy-and-dirty-tricks-cambridge-analytica-uncovered-investigation-expose

Almost never have I heard anyone speak or even mention this very real variable (spring, summers vs winter racing) when manipulating databases for modeling.

Do most handicappers ask the right questions when determining which horse to play?

I think if you are basing wagering decisions on past performance of horse and trainer you'll miss cashing tickets when price-horses run new tops which happens everyday at a track near you.

Perhaps handicappers could spend time determining why some horses are ready to run a big race under today's conditions or not.

[JerryBoyle]

Originally Posted by PaceAdvantage

Some of the drawdowns in that first chart would have sent the less hearty among us scurrying for the exits long before we gave it a chance to pan out over the next billion races...

Haha, yep. I wouldn't bet this directly, as there are some simplifications made to allow quicker generation of the backtest. It's also full kelly rather than some fraction. But yeah, that 100%+ drawdown in the beginning is a bit worrisome...