Understanding The Concept Of Value

I wanted to talk a little bit about the concept of value today because I feel that it’s almost certainly one of the most misunderstood elements of betting, but at the same time it’s also one of the most important factors of successful and profitable betting, regardless of which selection method you choose to use.

First off, let me dispel a couple of bookie shop myths:

  1. Value betting is NOT taking on a short priced favourite “just to get some value”.
  2. Value betting is NOT backing any horse each-way when it reaches “an each-way price”.

In fact, there is no such thing as a value bet to each and every person. It’s all in the eye of the beholder and what I might feel is a value bet almost certainly won’t be to someone (preferably EVERYONE!) else.

There’s also no feasible means of judging value based on one single result. Sure, you may have taken 4/1 about a 3/1 winner earlier in the day, the horse won, but there was no surefire way of you knowing it would win before the race, so the fact you took a bigger price doesn’t necessarily mean that you’re a value bettor all round. It’s a step in the right direction, for sure, but the only thing that will tell you for certain that you’ve had a period of “value betting” in your selection method is when you tote up your profit and loss.

So there you go. Clear as mud… 🙂

However, all of that said, I’m going to explain how I attempt to find value selections and I’ll try to describe it in a way that should hopefully help you to make the most of your system research too.

Profit Margin

The way that bookies make their money, theoretically at least, is to build an overround into the market so that they make a profit of between 5% and 60% (and often more in big field handicaps) regardless of the result. It isn’t quite as clear cut as that because they rarely manage to balance their books as perfectly as they’d like, but this is the way that the bookmakers attempt to build a profit into each race.

On Betfair, however, things are very different. On many occasions you’ll find that the exchange prices are close to 100% and even in big field handicaps you’re rarely betting too much over (or laying too much under) 100%. That said, you then need to consider the commission you pay to the betting exchange and this cuts into your profits somewhat, but for example’s sake here I’m going to assume a 100% level book.

The False Favourite

One of the most common ways to reduce the margin to less than 100%, thus creating a value situation on every runner in the field, is to eliminate short priced favourites who have no realistic chance of winning. Take for example an 1/1 favourite who has no form at the distance, on the going, at the course, or even better, who is proving unruly, or sweating up at the start, this would be a prime candidate for a “false favourite”.

Nowadays you don’t really need to be a genius to work this out, because a quick check on Betfair before the off is usually sufficient to spot when a situation like this is occurring. If the bookmakers are showing 1/1 and the horse is trading at 2.3 or more, often much more, on Betfair, right before the race goes off, then you can almost certainly guarantee that “something” is up. And here’s the thing about that…

If you can confidently eliminate this horse from the equation it automatically reduces a 100% book to a 50% book and therefore any bet you place in the race becomes a value bet, because if the fav was a non-runner the odds would probably subsequently be halved on every other runner in the field.

How To Play This Situation

The thing most people would do in this situation is think “weak favourite, let’s lay it”, but that’s wrong!

The bookmakers still have the horse at 1/1 remember, whereas Betfair is far more realistic at 2.3, so the smart move here would be to check the bookmakers odds against the Betfair odds for the 2nd, 3rd and 4th favourite in the race. If there’s little difference (for example if 2nd fav is 7/2 and 4.7 on Betfair), then the value proposition here would actually to be to back the 2nd fav and perhaps even dutch it with the 3rd fav too.

If the odds were 7/2 and 6/1 for the 2nd and 3rd fav, dutching both would return £273 for a £100 stake, which is £73 more than taking your chance on an 1/1 favourite who is showing obvious signs of weakness.

I know which option I’d prefer… 😉

How To Apply This Principle To Your System Analysis

What I’m going to tell you now will likely go against the beliefs of many of the systemites amongst you, but I believe it to be true and I think when you come around to this way of thinking you’ll benefit greatly from it.

Let’s say that you’ve come up with a system for laying short priced favourites that you know to be solid. What the majority would do is blindly follow the system selections regardless of price, but as I just explained this isn’t always the smartest thing to do because you’re often ignoring the “value proposition” in the race.

When you backtested your system the SP of the fav would show as 1/1 and then you’d perhaps build in an extra 10% to cover the overlay at the odds on Betfair. However, the actual odds are much higher, plus, if the selection gets beat, you’d then have to pay up to 5% commission on your winnings too.

You’d be betting undervalue in this case, whereas if you were to do as I suggested earlier and back the strongest alternative, or alternatives, to the favourite, you’d be betting with value on your side.

And you’d avoid paying the Betfair commission on your winnings too.

Remember that in order to profit in the long-term you need to be betting over the true odds when backing and under the true odds when laying, so I hope that this article has given you a little food for thought.

Any questions or comments are, as always, most welcome…


24 Responses to “Understanding The Concept Of Value”
  1. Eddie Lloyd says:

    Hi Paul,
    Absolutely fantastic article and one I will be archiving! Although I knew all of the above, its always a struggle to convince other people. It’s a bit like the off-side rule with the missus!!! I don’t know how many times I’ve explained it, it doesn’t sink in!! Hopefully people will learn from this and something that I must admit I’ve not factored into my recent research of new systems.
    Another reason why its probably the best 47 quid I’ve spent in a long time!
    Thanks again,

    • Paul says:

      Thanks Ed – I appreciate that!

      You’re right that it’s like the offside rule – it took me a while thinking about the best way to explain it with an example that (hopefully) makes some sense! 🙂

      ~ Paul

  2. tony harrison says:

    Hi Paul,
    To be brief I agree value can’t be known until after the result, although a lot of pro’s would disagree with us, but getting value from the bookie backing the 2nd. & 3rd in the betting is almost impossible. as all the big bookies fall in line with betfair. I know this becase I have the VHM system and have stopped using it for that reason. Just a thought, wouldn’t it be better to lay both the 1st & 2nd FAV on betfair as one has to lose or both


    • Paul says:

      You’d be stunned at the number of times Betfair has a short priced favourite at a massive price compared to the bookies Tony. It’s in the bookies interests to hold back the low price for as long as possible on these ones, so this is a time when they’ll choose not to fall in line with Betfair.

      In this example, the 2nd and 3rd fav could easily be 7/2 and 6/1 with the bookie and 4.7 and 7.6 on Betfair. That’s the way I’d expect the prices to look actually. The only horse that’s out of sync is the favourite and the other two prices, after commission, are almost identical to the bookie odds, so those are the value proposition.

      I’m sure the only pro’s these days are traders. Betfair would agree. I’ll still have fun bets on a Saturday or at the big meetings, but form and so on is merely a guideline now… the real money is in knowing the market and playing the prices. It probably always has been in one way or another.

      ~ Paul

  3. geordie smith says:

    Well paul this is very interesting. I have been checking through systens since I was introduced to them about 15 years ago. But just recently I have been looking at something where you back 2 in a race .So im sure this will help thanks geordie.

  4. norrie lovatt says:

    hi paul,
    ive been doing this for years now and couldnt agree more, though i dont tend to dutch them as i find that the bigger priced one wins as often as the shorter priced one. i know it makes no difference if you dutch just i get a bigger kick when the bigger price goes in. The first thing i do when i look at a race is look for a price first then start looking at the horses and the race stats etc. if you cant get a price then dont bet.

    p.s read that your dad had dogs at thornton my dad had them as well at wallyford , ah memories eh

  5. tony harrison says:

    when you dutch to win one could win or both could lose and one MUST LOSE so value is lost. If you lay two both COULD LOSE and pay out, also if one wins the race the other MUST lose and pay OUT reducing the liability. Bookies don’t just lay one horse. In some situations you could lay at odds on and if the odds on wins you could still show a profit because the other must lose. I find it strange that most lay systems only lay one horse. to me its the only way to lay.

  6. Ronnie Nicolson says:

    Do not understand the comment ” you would avoid paying commission on your winnings”…surely you always pay commission on betfair winnings?

    • Paul says:

      Yeah, you would if you were backing them on Betfair Ronnie, but what I meant there was following what’s happening on Betfair and then backing them with the bookies.

      ~ Paul


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