The Power Of Positive Gearing
 

a.k.a Parrondo's Paradox

All hail Juan Parrondo who invented:

Given two games, each with a higher probability of losing than winning, it is possible to construct a winning strategy by playing the games alternately.

How does this apply to horseracing?
How can we apply this using a Betting Exchange?

All will be revealed bit by bit.

Firstly, a couple of questions....

Suppose the odds on the favourite were $3.30 on one of the totes.
Suppose someone offered you $3.00 as back odds, BUT if the horse doesn't run a place you get your money back!

Would you take the bet?

Hint: 50% of favourites that run a place actually win

How about $2.98, would you still make the bet?
Perhaps $2.90?
Even $2.80?

How about it folks, what do you reckon?

A little bit more.....

Now suppose there was an odds on favourite say $1.40 (an example from last night in South Africa), and the same offer was made, say $1.20 odds, but if the horse doesn't run a place you get your money back.

Would this look as good as the first scenario, even though these horses have a statistically 65% chance of winning if they run a place?

when i said i lost it all i actyally had 2.86 left with wich i did exactly what you alluding to there chrome and luckily lastnight was death for fav. backers, i now have 6.48 i thiught i would stop while in front and it 12 oclock as well bed time...the cats out of the bag now..

Good to hear you've bounced back a little ****************, but a word of caution...what happens if four favourites in a row win tonight?

You have to know when to apply the strategy, and when to reverse it.

Sometimes it's not longterm advantage, other times it's a definite advantage.

This is only the preamble to the guts of it, which I'll reveal shortly.

The most important factor of Parrondo's Paradox, is the zig zag effect which turns a negative into a positive.

The trick is knowing the formula which indicates zig or zag.



:D :D :D

CP,

I suspect I'm not the only one getting bogged down with your figures.

But I guess you are leading into something like:

Back A for a win.
Lay A for a place to cover your win stake.

Giving you:

A unplaced = break-even
A 2nd or 3rd = lose
A wins = win - but reduced collect

Pretty close, but doing this for example on all favourites will result in a loss.

Basically the premise is this:

At times you lay A for a place and back it for the win
At times you back A for the place and lay it for the win.

This is the zig zag effect which creates a profit from an otherwise losing game longterm.

You work out which strategy to use based on the profit versus loss risk/reward ratio.

If the downside is worse than the upside, you reverse the strategy and can apply this to numerous horses in the same race.

For example, last night applying this formula to the first four in the market resulted in an $18.90 unit profit flat stakes. (some thirty race in South Africa, UK and USA)

It is the flip flop or zig zag that makes it work.

The other reason this works is because of the extraordinary win strike rate of horses which managed to be in the placings close to the line. So by backing for the win, but laying for the place, we have a free ride on any disappointing horses.

Using the strategy in reverse means that you are avoiding poor value and if the horse wins, your exposure is lessened by the place component. Thereby laying at reduced odds. If they run unplaced you lose nothing.

Chrome

You're giving the secret away :eek:

Can you give it away some more with an example or two ;)

I've inadvertently lost my spreadsheet to the wind, never hit shift and delete at the same time :eek: ;)

I thought I was deleting the old copy and deleted the amended version....back to the drawing board.

But by way of example:

Simply do a "what if" calculation on betfair for backing the win and laying the place, note down the potential loss and potential profit.

If the potential loss is greater than the potential profit, reverse it.

That appears to be a solid idea of yours Chrome.
Thanks for sharing your findings.

Cheers.

Dear Chrome,
Could you explain how the hedge button works on the Bet Trader tool please.
I cant seem to figure how it works maybe you could give an example.

Cheers.

Sounds similar to Arbitrage betting?