True odds calculation

[ShaunWhite]

you can see why it drove me mad for 6 months !!

You're over complicating it, or rather the sports market terminology is over complicating it.
Back= Sell.
Lay = Buy.
Supply = Offers.
Demand = Takers.

And as an aside the commodity being traded is a futures contract on an asset (horse) that will be priced at 1 or 0 at the time the contract expires (market closes).

That's all there is to it. Could be a horse or it could be pork bellies.

[goat68]

you can see why it drove me mad for 6 months !!

You're over complicating it, or rather the sports market terminology is over complicating it.
Back= Sell.
Lay = Buy.
Supply = Offers.
Demand = Takers.

And as an aside the commodity being traded is a futures contract on an asset (horse) that will be priced at 1 or 0 at the time the contract expires (market closes).

That's all there is to it. Could be a horse or it could be pork bellies.

right, so I can't see how that alone helps with trading, you've still have to make your own assessment of opinion, be it form, order flow, .....?

[ShaunWhite]

Re what the other guys have said.... Potentially the most interesting thread for ages.

[goat68]

Ie. you need to anticipate somehow future Demand(takers) ??

[goat68]

the old conundrum, historical (demand/takers) or historical(supply/offers), are no predictor of the future, especially when big future orders or XMatching come into it ?

[ShaunWhite]

right, so I can't see how that alone helps with trading, you've still have to make your own assessment of opinion, be it form, order flow, .....?

If you can price up a field you can spot mispricings. Let's not get distracted by chat about movement, caused by supply demand/order flow. That's more a TA topic and I think the thread is more about pricing from fundamentals. It's the difference between the two styles of analysis that creates the opportunity for value. FA guys pull towards the true price and TA guys pulls towards opinion, which can be easily skewed from the true price by money, naps or commentary etc.

[napshnap]

Really? What's so hard to gather data, then "streamline what you feel has a greater preponderance and weight it accordingly." (like wearthefoxhat suggests) then sum weights for each runner and finally calc odds from it?
Obviously the trickiest and most time consuming part of that "not so hard process" is the 2nd part, but the last one is a simple math.

napahnap I made no reference to the ease or difficulty of gathering the data, nor the 'streamlining' of it etc. because I was majoring on the step after that ... the conversion of that data into odds by calculation. Note, calculation ... not guessing, not assessing, not approximating for later fine tuning but hard +,-,/,x and other more complicated variations of those functions. I'm happy to stand corrected, could you publish the formula for calculating the odds . As I said I have never seen a formula that would stand up to examination by a mathematician and sorry wearthefoxhat and it may be that my understanding of your approach is out of date but the calculation I saw as being your approach some time ago was not mathematically sound for creating true odds for comparison.

I'm not saying that this will be "true odds" but at least it will be your odds, your starting point for experimentation!

But this thread is titled "True odds calculation" so I'm referring to a calculation of the true odds

Alright, I maybe misread it, it sounded like you can't calc (convert) odds from ratings, weights or other metrics at all.
I agree that you can't calc "true odds" (cause "true odds" is a controversial entity).

[wearthefoxhat]

From a trading perspective, after a calculating a race, the top rated "should" be the favourite on all known key attributes that align. Then by assessing the historical prices/results of that racetype, it could indicate the price range of the favourite.

An adjustment could be made on how strong the top rated is by how far ahead in the ratings it is to the second rated, and the momentum steam or drift should continue.

Wolv 6.30

Wolv 6.30.png

With this race, Lincoln Gamble had early morning prices of 2.63, the price range of the racetype was 4.32, and was 18pts clear of the next rated. The view would be a steam is more likely, the ISP was 2.00. (and won easily)

As there can never be a True Odds calculation (too subjective), maybe the next best thing is to judge the potential price movements on the top rated that should be the favourite and its strength of opposition.

[andy28]

Thinking about it I don't think there is such a thing as true odds for anything, it's more a case of near enough is close enough.

If true odds did exist or could be calculated then who would bet? There would be no such thing as gambling. The closest to true odds is a coin toss but even that if you did it 1,000,000 times would that count then be the true odds of a coin toss? I bet if you repeated the exercise you wouldn't get the exact same count, heck tails may have had more in first sample and heads more in 2nd sample so which is the true odds? Best of 3?

We bet/trade on differing opinions the bigger the difference the merrier

[gazuty]

If true odds did exist or could be calculated then who would bet? There would be no such thing as gambling. The closest to true odds is a coin toss but even that if you did it 1,000,000 times would that count then be the true odds of a coin toss? I bet if you repeated the exercise you wouldn't get the exact same count, heck tails may have had more in first sample and heads more in 2nd sample so which is the true odds? Best of 3?

Hi Andy

On the assumption the coin is fair, the true odds are 0.5. It doesn't matter if on 1,000,000 flips you don't get 500,000 and 500,000. Spend a bit of time here to understand - https://stattrek.com/online-calculator/binomial.aspx

And if you get 1,000,000 heads in a row, it doesn't change the fact the next flip is still 50/50.

Gaz

[andy28]

It's going to take me a few days to understand all that

Plus early start in Victoria today and at Flemington tomorrow

[firlandsfarm]

Alright, I maybe misread it, it sounded like you can't calc (convert) odds from ratings, weights or other metrics at all.
I agree that you can't calc "true odds" (cause "true odds" is a controversial entity).

No I don't think you misread that bit. there are many stabs at converting ratings to odds I just don't see them able to stand up to mathematical theory. By calculating I mean put a set of ratings into a spreadsheet and have it calculate the respective odds with no interaction with the user.

I thought I had cracked it with what I will refer to as a calculated Monte Carlo algorithm based on creating random numbers related to each runner's rating and calculating the probability each runner's 'random number' was the highest. Obviously the runner with the highest rating would be most likely that it's random number would be the greatest (the winner) thus introducing big is best. But at the same time the random number of the runner with the smallest rating can sometimes be the largest albeit rarely but acknowledging that every donkey has it's day! The formula used calculates the outcome for an infinite number of Monte Carlo iterations (I found performing actual Monte Carlo simulations too time consuming when using a large number of iterations for greater accuracy) ...

LargestRandomNumberFormula.png

(yeah, I spent more time researching how to calculate the formula than I did finding it! I had three specimen calculations I could test my interpretation against so I was satisfied I had converted it into Excel correctly.)

I then compared the algorithm calculated probabilities/odds with market history race by race (it took my laptop 3.5 days to run the algorithm across my racing database) and found a clear bias towards the higher rated runners i.e. the calculated odds were consistently below market odds so I concluded the results were not accurate. It could of course be the ratings that are at error and not the algorithm. I'm not using my own ratings so can only back test against ratings in the market (Proform, Adrian Massey etc.) but the problem there is accessing a good history to test against.

I'm thinking of introducing what I am calling a 'tilt' to sets of ratings. By that I mean reduce the higher ratings and increase the lower rating just to see if it brings the results more in line with the market prices. I'm not trying to back fit the algorithm but when 90% of results on favourites trend in one direction it's clear it's not correct! I'm testing on favourites because of the neutrality of price over the long term.

I appreciate I have probably gone off-topic with this comment but I would like to see alternative ways people create odds from ratings.

[decomez6]

And if you get 1,000,000 heads in a row, it doesn't change the fact the next flip is still 50/50.

Gaz

true ,
--other side of the coin = bellcurve distribution and time decay

bellcurve distribution.gif

[wearthefoxhat]

Alright, I maybe misread it, it sounded like you can't calc (convert) odds from ratings, weights or other metrics at all.
I agree that you can't calc "true odds" (cause "true odds" is a controversial entity).

No I don't think you misread that bit. there are many stabs at converting ratings to odds I just don't see them able to stand up to mathematical theory. By calculating I mean put a set of ratings into a spreadsheet and have it calculate the respective odds with no interaction with the user.

I thought I had cracked it with what I will refer to as a calculated Monte Carlo algorithm based on creating random numbers related to each runner's rating and calculating the probability each runner's 'random number' was the highest. Obviously the runner with the highest rating would be most likely that it's random number would be the greatest (the winner) thus introducing big is best. But at the same time the random number of the runner with the smallest rating can sometimes be the largest albeit rarely but acknowledging that every donkey has it's day! The formula used calculates the outcome for an infinite number of Monte Carlo iterations (I found performing actual Monte Carlo simulations too time consuming when using a large number of iterations for greater accuracy) ...


LargestRandomNumberFormula.png
(yeah, I spent more time researching how to calculate the formula than I did finding it! I had three specimen calculations I could test my interpretation against so I was satisfied I had converted it into Excel correctly.)

I then compared the algorithm calculated probabilities/odds with market history race by race (it took my laptop 3.5 days to run the algorithm across my racing database) and found a clear bias towards the higher rated runners i.e. the calculated odds were consistently below market odds so I concluded the results were not accurate. It could of course be the ratings that are at error and not the algorithm. I'm not using my own ratings so can only back test against ratings in the market (Proform, Adrian Massey etc.) but the problem there is accessing a good history to test against.

I'm thinking of introducing what I am calling a 'tilt' to sets of ratings. By that I mean reduce the higher ratings and increase the lower rating just to see if it brings the results more in line with the market prices. I'm not trying to back fit the algorithm but when 90% of results on favourites trend in one direction it's clear it's not correct! I'm testing on favourites because of the neutrality of price over the long term.

I appreciate I have probably gone off-topic with this comment but I would like to see alternative ways people create odds from ratings.

Good post.

I always look to simplify things where possible.

My view on producing a rating for each runner is based on my own experience(s) reading books/forums, testing my own data...etc This doesn't mean I've solved it, because horse racing is an imperfect sport where there is always an incomplete picture.

My approach is to take a set of attributes that I think affect/influence an outcome of a race, weight them and produce a rating. In some cases, combine certain attributes that strengthen the overall rating.

The one thing I found was that the top-rated was often the favourite and well backed. So this told me that the market makers seemed to be taking into account similar information into their algo. I also quickly learned, that sometimes, the bottom rated would win, but the price was a value one comparing the market price with my own tissue price. I also learned that if a favourite was poorly rated, they ran poorly too.

Taking all that into account, there are many ways I can utilise one set of ratings. This includes In-Play if the race is going the way I visualised it.

I also tend to avoid tweaking things as horses aren't machines and will have off days, be unlucky, or the jockey might make a mistake.

My early attempts were shite, but I learned from them. I also believe there are websites/resources that present the information better and would save a lot of time, but I enjoy the process.

[wearthefoxhat]

And if you get 1,000,000 heads in a row, it doesn't change the fact the next flip is still 50/50.

Gaz

true ,
--other side of the coin = bellcurve distribution and time decay

bellcurve distribution.gif

As someone that plays poker (not so much recently) I understand variance, but I think if I lost a flip 1,000,000 times I'd be mighty suspicious that I was being set up in some way...(even if it was true odds)

Someone once said, if you were offered 5/4 tails, (happy days) and then they proceeded to spin 99 heads in row, what would you do on the 100th spin? Answer - get the f&*K out of dodge...