Monday, December 8, 2008

Secrets of Professional Turf Betting

I haven't read this book, just found its summary very interesting. It agrees with the idea of exploiting sentiment for gains in speculative industries.

Source: Mark Mills at Amazon

Chapter 1. Always bet against the public. Betting at a racetrack is a zero sum game from which the track takes a significant chunk of the wagers before anyone gets paid. Further, the people who know the horses best and can easily fix the race, the owners and trainers, are betting against you. At best, only a minority can ever win. The track requires the majority to lose, therefore avoid the majority play. Only bet when two situations occur simultaneously: 1) you have well considered odds in your favor. 2) The public is betting your choice is a loser. Put the two together, and be sure to have 3-1 or better odds in your favor. In other words, always think in terms of probabilities.

Chapter 2. Things are easier now since the 'action' is more liquid and public opinion based on weak authorities.

Chapter 3. Keep up to date on new angles: read what the professional reads.

Chapter 4. The public doesn't lose their fair share. Statistically, they should only have 10% losses. Instead, many lose everything they bring to the track. They do this by allowing emotion to switch their betting style from one race to the next, and always switch at the wrong time. If they just picked 'position 6' every time, they would only lose 10%, but they bet little when they should bet much, and much when they shouldn't bet at all. It is the 'switches' that pull money from the public. Having 'guts' means sticking with your strategy in the face of losses. You can count on the public being unable to demonstrate guts.

Chapter 5. Ever changing cycles: The game will only last as long as people see enough winners to convince them they have a chance. If the 'true' odds become obvious, no one would play. Therefore, there must always be long shot winners and ceaseless change in the strategies of the winners. Early in the season, the public badly assesses the odds, the pros bet them and win. Late in the season, the public loads up on the good horses, but this reduces the odds, so the long shots get undervalued and provide the winning odds.

Chapter 6-7. Be aware the owners and trainers need not always focus on winning. Know what motivates the owner of the horse to enter the race. Are they building a reputation? Trying to win purses? Trying to turn the public against the horse, then win as a long shot? Understand the rules constraining owners and trainers. Know the claiming rules. Know how to read the weight reports.

Chapter 8: Sum the odds. The odds are reported as 3-1, 4-1, etc, so it isn't obvious that the sum should be 100. Convert the odds to percentages and sum the list. If the sum of each horse's chance of winning is less than 100, bet on every horse and you are sure to win. If you are sure a favorite won't win, you can create a sure win by betting on everything else (less than 100 sum). The track is sure to make money if the sum is over 100.

Chapter 9: Make your own price lines (100% books) and test them every day (paper workouts)

Chapter 10: Pittsburgh Phil's system: buy the stuff that no one wants. It takes guts to stick with the system. It killed Pittsburgh Phil at 52. It takes guts, that is why it doesn't matter if everyone knows the system. Guts isn't the ability to ignore fear, it is the ability to stick to your original goal, process and strategy. (!!!!)

Chapter 11: Money management: the obvious, don't spend your living expenses, but also, the important thing is your emotional balance. Without balance, you switch and that is how to lose.

Chapter 12: you cannot grind, you must speculate. You can't chisel, you must gamble. Accept and expect more losers than winners.

Chapter 13-15: Reading the racing publications

The rest of the book is a detailed plan for seasonal betting, January through December, one chapter per month.

While reading, I speculated on how to apply this to the securities markets. What is a 'race', a day of trading? In terms of stocks, what are 'claiming races'? What are weights?

The notion of 'ever changing cycles' is really interesting. The 'racing game' is clearly a product of some evolutionary process that weeded out less robust 'betting markets'. By looking at the 'game' as a whole, one can see it as an activity perfectly designed, but having no designer. Most will lose, but still find it enjoyable enough to continue the playing. Further, it is impossible to investigate unemotionally, since the attraction perpetuating the games existence is entirely emotional. The opacity is central to the game's survival.

0 Reflections: