How Does HorsePower Calculate EV?

Expected Value (EV) is critical in matched betting. If we want to make a long-term profit we need to be placing bets with a positive EV, and the higher that EV is the better.

If you are not familiar with the concept of EV we recommend checking out this lesson from our Vocabulary course.

Here we are going to look specifically at how HorsePower calculates EV...

Method 1

If you are using the default settings, HorsePower will open any available Place markets for the race in addition to the Win market.

The place markets will be pinned on the left-hand side of your browser window, while the Win market will be a full tab to the right of HorsePower.

If there is sufficient liquidity in both the Win and Place markets we can use their odds as a way to gauge the probability of a horse finishing in the relevant positions.

For example, if a horse has Win odds of 5.00 and Top 3 odds of 2.00 we could say that:

• Win Probability = 1/5.00 = 0.20 = 20%
• Top 3 Probability = 1/2.00 = 0.50 = 50%

If we then want to calculate the probability of the horse finishing 2nd or 3rd we can just subtract the win probability from Top 3 probability. So in the example above the horse would have a 30% chance of finishing 2nd or 3rd.

To calculate EV we then have to consider the outcomes in each scenario. Let's say that our qualifying loss on this bet is $6.00 and we will get a bonus bet of $50 if it finishes 2nd or 3rd. That bonus is the equivalent of $40 cash if we have an 80% retention rate.

Our EV would therefore be:

• (Probability of win*Outcome if win)+(Probability of Place*Outcome if Place)+(Probability of lose * Outcome if lose)
• (0.2*-6.00)+(0.3*(40-6))+(0.5*-6.00)
• (-1.20)+(10.20)+(-3.00)
• $6.00

When there is sufficient liquidity in the markets, and the place market matches the available promo (e.g. the promo is for 2nd or 3rd and we have a Top 3 market available), HorsePower will calculate EV using exactly this method.

Method 2

Unfortunately, Betfair does not always provide markets that match up with our promos. Sometimes our promo will be for run 2nd but the only place market is for Top 3. Or we'll have a 2nd/3rd promo but the only place market will be Top 2.

In this situation we can still use the available place market as a starting point when calculating the probability of the horse placing, but it will require some adjustment to suit the terms of the promo.

HorsePower uses an algorithm that considers the number of runners in the race and the odds of each of them in order to make that adjustment. This results in an EV calculation that we can have a high degree of confidence in, but it will not be as accurate as with Method 1.

Method 3

Both of the previous methods rely on us having a liquid place market that we can use as a true measure of place probability. Unfortunately that is not always available.

When betting on low-profile races (e.g. country racing on a Monday) the place market can often have close to zero liquidity. It may improve in the final minute before the race starts, but if you are placing bets earlier than that a different measure of calculating EV is required.

In this situation HorsePower uses an algorithm which is based on the way place winnings are calculated for each-way bets in the UK. It considers the number of runners in the race and then, based on that, calculates the place odds as a percentage of the win odds.

This method is less accurate than the previous methods but it works well in most situations. However, it has a tendency to over-estimate EV on horses at very short odds (i.e. sub $2.00) and also when there are 6 or less runners in a race.

Selecting a Method

HorsePower will automatically use the best method available to it, but there is a setting you can change which influences how it makes decisions:

These settings determine whether or not the current liquidity in the place market is considered sufficient to switch from Method 3 to Method 1 or 2.

The market efficiency refers to the percentages seen at the top of every Betfair market:

If you would prefer to avoid using Method 3 and trust an illiquid Betfair market instead you can reduce the efficiency threshold (and the matched amount if necessary). Alternatively, if you only want to use Betfair odds when they are truly efficient you can increase the percentage here.

Telling Which Method Is Being Used

You can easily tell if a place market is being used in the current EV calculation by checking if it has a green tick or a red cross on the HorsePower page:

You can also hover over it to get more info about why it is or isn't being used:

If the market is being used but it doesn't match your promo (e.g. Top 3 market for a run 2nd promo) you can assume that Method 2 is being used.