We first had Nick Pinkerton on the show in July 2013 and he talked about how his experience in financial markets helped shape his approach to punting. He also gave some solid tips on how to find value as a punter and how to keep the odds in your favour by managing risk. Nick learned the trade with Ferncourt, Mark Read and Con Kafataris to hone his form analysis and risk management skills.

So we’ve got him back on the show to find out exactly how he’s been going over the last 18 months and he is honest enough to explain why it hasn’t all been plain sailing.

Punting Insights You’ll Find:

  • Why punting is like an extreme sport
  • The key lesson he learned from successes and failures in the last year
  • Why excellent form analysts can still be very poor punters
  • The profile of horse he is looking for when doing video replays
  • How he deals with losing runs

A link to the case study mentioned: Lessons From The Brain-Damaged Investor

Today’s Guest:
Nick Pinkerton

David Duffield: Good day, Nick, and welcome back to the show.

Nick Pinkerton: Hi, David, how are you?

David Duffield: Going very well, thanks and looking forward to having another chat with you. We had you on right about 18 months ago and have followed you up until that time as well. Yeah, just wanted to check in with you, see how things have been going, and also we’ve taken some questions from our members on some of the most pressing issues and what they would like to ask of someone that’s been in this game for quite a while. We’ll run through those in just a moment, if that’s OK?

Nick Pinkerton: Yep, no problems at all.

David Duffield: All right, the first range of topics that came up was just to do with getting started, and one of the common questions was: How do you gain the confidence when you’re starting out?

Nick Pinkerton: I think in regards to confidence, I see punting as a bit of an extreme sport. If you use skiing as an analogy, lots of people can enjoy green runs and have fun. Some can go down a green run and tumble, and others don’t like to tumble. Yet, there’s plenty of people who with a bit of practice can go and tackle a black diamond run, but it takes a completely different type of attitude and application to get to representative level or whatever it is you’re doing.

Betting is all about confidence. If you’ve got skills and a plan, you’ll get there, but nothing builds confidence more than having that intimate knowledge of what factors provide you with the edge that you’ve got and helping you make that money. The most important thing is just trying to identify what your edge is.

I’m not all things to all punters, but I manage to find out what works for me.

Although it hasn’t always been that way. Since we last spoke, I’ve actually just got back from a long break from racing, only in September of this year. I come back from Caulfield Cup Day in 2013, and one of the reasons I took that break from racing was I actually had a dent in my own confidence. We’re not immune to it, even after 20 years of successful punting. I had my first extended losing period in sort of middle of 2013 through to Caulfield Cup. Then at the time, it seemed inexplicable, but funnily enough, when I stepped away, as most things do, when you get out of the heat, you can see the trees for the forest.

I realised a few things.

Basically, I got away from the things I used to do and do well. I got confused between what my strengths were, and I tried to incorporate a lot of things that were just not my natural way of doing things. I got further and further away from the things that I was confident about. Even to the point that I started to question whether I even had an edge in what I thought I did.

David Duffield: We might expand on that a little bit later, just to get you to see the journey that you’ve been on, but in terms of getting started for a lot of guys that would dream about going from what they’re doing right now, to doing it full time. Obviously, the skills and the plan is one part of it. Do you think that’s the only way to have that confidence is just to have that skills and that background behind you?

Nick Pinkerton: Yeah, absolutely. One of the sayings I grew up with when I was financial markets trader through the 80’s and 90’s is, I once came across a saying and it says, “Fear is crippling, and fear comes from ignorance.”

Now that’s not ignorance in an absolute sense, obviously, but it’s ignorance in the sense that you can be overwhelmed or intimidated by what you don’t know. I think that’s the most important thing.

For a punter to go from a weekend warrior or a part-time punter with a full time job to someone who relies on it for an income, you really need to understand what it is that you don’t know that you don’t know. You’ve got to read and research everything you possibly can, because most of us know what we don’t know, but a lot of us don’t know what we don’t know. That’s the thing. You’ve got to look at other successful punters around you, find out what they’re doing, and find out what resonates best with you. Build a plan around that.

David Duffield: OK. I like that quote about fear. Another one I’ve heard which isn’t probably quite as appropriate, but “Fear is pissing your pants, and courage is being able to get on with the job with wet pants.”

Nick Pinkerton: Yeah, absolutely. Courage and resilience is something that professional punter definitely needs a lot of, yeah.

David Duffield: Another one about getting started was: What is regarded as an acceptable strike rate? This is the way it was phrased to us, so you may even mention profitability, but: What is regarded as an acceptable strike rate for a serious punter to aim for, or is there another measure that should guide a punter?

Nick Pinkerton: Yeah, I wouldn’t be concerned about strike rate at all. I’d be hard pressed at any period of, I can get the figures of course, but over 20 years, I’ve never had a look at what my strike rate is. If I’m reporting on results, yes, I’ll say I had a strike rate of and average dividends of, but I’ve got to go and find it. It’s not something I’m looking at.

I think what’s far more important is profitability. You need to be looking at what your level of profitability is or your profit on turnover is. Again, I come back to it, you need to be mindful of where that’s coming from.
Where is your edge? I’ve met a lot of fantastic pre-race analysts, but they’re not great at post race analysis. I’ve met lots of great pre and post race analysts, but they’re just no good with race day betting operations. They just don’t know how to bet. They can isolate winners and they can play on the good market, but they take the market to the races, and they come home losers.

I think you just, what it is that’s giving you value that you think you’ve got in the marketplace. That’s the most important thing. Not strike rate, but your profit on turnover and your profitability will give you an answer to what that edge is. You should know through what you’re doing where that edge is coming from.

David Duffield: Yeah, and one of the main things you do want to be aware of your strike rate, I know it’s not a major metric you look at in terms of success, but just bankroll management and being able to cope with losing runs. That’s because obviously the lower the strike rate, the longer the losing runs you’re going to have, and you need both the bankroll and the mindset to overcome that.

Nick Pinkerton: Yeah, absolutely, and I think there that the key to bankrolls is having a realistic expectation of what your horses chances are of actually winning the race.

I think on balance, the average punter watches a $4 chance go around in a race, and I think their expectation is the horse has a much better chance than the average $4 chance would have. Likewise I know people who back odds-on chances, and they just think they are across the line.

You’re taking $1.80 something, you think it’s a good thing, right?

But the reality is, $1.80 chance is going to get beaten plenty of times, so you can’t kick the can when 2 or 3 of them get beaten you happen to bet 4 or 5 of them in a row and they fall over. It’s certainly not beyond the realms of possibility. I think you have to keep in mind the whole time what a horse’s most realistic chance of winning is, and obviously, starting price is the best guide to that.

If you’re going to bet $10 chances, you need to manage your business a hell of a lot differently, than if you’re going to back even money chances.

David Duffield: Another question we had, and you’ve mentioned this in terms of knowing your rate and also confidence and discipline, but this says, “What, in your opinion, is the key to long term success?”

Nick Pinkerton: Very good question. I think it’s having a very clear plan that’s built around your skills and the skills that work for you, and then the discipline and resilience to carry that out. When I mean resilience, I’m talking about the ability to have the next bet exactly the same as you would have before the previous bet’s been resulted.

David Duffield: That’s a good way of looking at it. One of the things I’ve noticed, just speaking to a whole gamut of professionals across different codes, is that every professional punter operates differently. You can’t just buy a professional punting franchise and operate it that way. People have very different approaches, and they can all win with different strategies and definitely different mindsets.

Nick Pinkerton: Absolutely. I think the idea of a professional punter or the success of the successful punter actually combines art and science. I think to be a successful punter, you need to be an artist with a science degree basically. The science degree will keep you solid and in line with facts and statistics, and the artistic element will obviously allow you to bring in your own interpretation of variables.

For arguments sake, with me, I would say my number one strength is in my pre-race analysis, which comes from a post- race work. I do a hell of a lot of video replay work, and I look for a certain profile of horse. I look for a horse that basically can demonstrate a capacity to absorb pressure in a race and still finish its race off. It’s a combination of sectionals and just overcoming some sort of adversity. That involves some sort of artistic nature and I’ve tried to teach that to people to get some duplicate ability or duplication in the amount of work I can cover, but I’ve had varying degrees of success with doing that. Some people get it, some people don’t.

I tried to map it down to a set of markers, and I think that would make it easy by making it a science, but I can’t try and teach someone when a horse is pulling. We can all see the extreme examples, but it takes a lot of experience and a lot of practice to know when it is really pulling to the detriment of itself. Or when it’s just racing a little bit keen and it’s probably not going to make a lot of difference to the outcome. Just not something I find you can teach.

David Duffield: That covers some of the getting started questions that we had. There were three other broad categories that came through. Next up will be lifestyle and mindset issues, then form analysis, and then bet placement, money management, and that type of thing.

The next category being lifestyle and mindset, a question we had was, “My biggest pain is me. In your punting life, have you ever felt this way? It’s such an up and down business. Could you share some strategies on some ordinary periods”

You mentioned that post Caulfield Cup day, 2013, was one of those periods or the lead up to that anyway. What would you share with someone like that?

Nick Pinkerton: It’s a good question. The roller coaster nature of punting is just something we’ve got to get used to. I don’t think there’s too many ways around it, and the nature of the beast is you’re just going to have those ebbs and flows. What I think is really important is that resilience I talked about before.
There was a study done back in 2005, and it’s an interesting study. They found a group of American academics, and some of them had an injury. They had a known injury to areas of their brain that were known to be associated with emotions.

They had 20 of those people, and they had 20 people that supposedly uninjured. They each gave them $20, and they gave them 6/4 about a coin toss. They were going to toss the coin 20 times, and they each had an opportunity to have a $1 wager on each of those 20 tosses.

The results are amazing. You can just imagine what happened. Some of them got off to a good start; some of them got off to a bad start. In the end, the basic findings of the result were that those that had an injury to parts of their brain that control their emotions, they bet on 16 out of the 20 occasions, even though they were getting 6/4 about an even’s chance. Yet, the people who had no impairment to the emotional element of their brain, only invested 12 out of 20 times, even though they were getting 6/4 about an even’s chance.

I think that says a hell of a lot about how we get in our own way, and I totally empathize with the question that your client asked. We do get in our own way.

Why on earth would you invest 12 out of 20 times, when you’re getting 6/4 about an even’s chance? The only possible conclusion is because we’re starting to think about the run that we’ve had. I started with a good bank. I could walk away with the $20 if I don’t play now. I’ve lost $5 in the first 5 tosses. I don’t want to lose any more. I’ll just close up shop. It doesn’t make sense if you’re getting 6/4 in evens chance, you should be betting on all 20, shouldn’t you?

David Duffield: Oh, for sure. I’ve never heard of that case study, so I might look it up myself. (Link to case study)

Nick Pinkerton: Yeah, I’m not sure the name of the study, but it’s an interesting study. I think the findings are something we can all relate to. It’s interesting.

Another thing is some more statistics, I’m not exactly sure what they are, but it’s something like in your punting life, you’re going to spend more than 80% of your time with a bank lower than it’s been at some point in the past, regardless of how successful you are. I think there’s some statistic that almost 50% of the time, your bank is going to be at least 25% lower than it’s been some time in the past. You’ve got to get used to these things. These are just normal things.

Income from a professional punting career is not going to come in a linear fashion. It’s not going to come in a straight line, but you just have to have some resolve to that. I think the most important thing is confidence. If you can build some confidence around what it is that is making you money, that will get you through those periods of negativity, for want of a better word, or some sort of drawdown on your bank. Does that answer your question?

David Duffield: It does and there’s a few follow ups related to that. These are all individual responses to a survey we sent out to our members, but it was, “How do you stay confident when 3 or 4 punts go wrong? How do you handle a run of losses, coping with losing runs? How does he deal with the psychological trauma of a long run of outs, losing odds on selections, discipline not to over bet?” They’re all on a similar vein, so I thought I’d share that with you, and see if there was anything else you wanted to mention about that, and just the importance of mindset.

Nick Pinkerton: I think in terms of handling a brutal long run, I can speak from experience. I recommend walking away.

One of the things you can do is just put some space between you and what you’re doing. Doesn’t need to be 12 months, but I think if you’re having a bit of a bad run, and you started to watch a spate of seconds or a spade of unlucky interferences or something like that, and you’ve started to question yourself. You can actually catch yourself starting to bring that negative talk in your mind, but I have a look at this. Everything I bet gets caught 3 wide or gets interfered with. Just take a break.

Put some space between you and what you’re doing for a week or two. Clear your head, and come back again with a fresh mindset. When you do come back, get very clear about what it is you’re going to do. What processes are you going to follow from a pre race and a betting point of view and still stick to those bets.

In regards to the over betting elements of it, I think the most important thing to do there is have a list of bets, and don’t have any of those impromptu, spur of the moment, type of bets. I think they are probably the curse of every weekend warrior or every part time punter.

David Duffield: It depends I think on how the selections are being generated because for our members, if we’ve had a run of seconds and stuff, we encourage them to dust themselves off and keep going.
Not to bet more and not to bet less.

I think it’s different if you’re actually doing the form yourself, and a lot of it is your own gut instinct and experience. That can be swayed or negatively affected if you’re having a bad run, but if you’re following a proven approach or you’re getting some third party analysis done for you, we actually recommend that you stick it out, because the way variance works I think people would be surprised that you could be doing a lot right, but still losing.

Nick Pinkerton: Yeah, I’d agree with that. If you’re getting your information from a reputable provider, yes, definitely try and stick with it, but if you have started to second guess and pick and choose, then I think it’s seriously time to consider what role you’re playing in the outcome. That might be when it’s time to say, I’ll just step away for a week or two.

Yes, absolutely, if you’re following them exactly the same, and you’re not picking and choosing. You’re not saying, oh, I’m going to leave this one out; it’s too short or I’m not going to bet that, it’s too long, yeah, by all means, stick definitely the plan.

David Duffield: All right, let’s talk form and a nice easy one to start with. That is, what do you consider most important when assessing the form in a race? Nice broad one for you.

Nick Pinkerton: Yeah very broad. For me, it’s trying to identify what would be grossly under valued or over looked by the marketplace. That can come from an analysis of sectionals. It can come from an analysis of rail positions. It can come from an analysis of where I thought the bias might be on the date. Then, of course, the important part of that is comparing it to what you’re hearing in the marketplace. Comparing it to what you think the mainstream opinions may be.

A classic example there might be Vince Accardi’s IVR’s which I know champion picks have been a big supporter over the time.

If something comes to town on a Saturday, in a stakes race, and it’s a provincial Victorian maiden winner, it’s going to be hard for a class weights ratings type of person to get it in. It might be hard too for a speed performance analyst to get it into the market as well, depending on how the sections of that race work. There could easily be things in the way Vince has looked at it, because he benchmarks it against every other horse, rather than relative to class or rather than relative to anything else. If, for arguments sake, that horse represented a good opportunity to me, being a Saturday stakes race, it only its second start at Melbourne. I would be comfortable that the reason that horse is overpriced, is because it’s undervalued by all traditional forms of ratings and pricing. I’d be comfortable that it’s because of the power of Vince’s IVR’s that you can back that horse on the premise that it’s undervalued or overlooked by the marketplace.

It depends on what it is for you. For me, as I say, I find a lot of them from video replays, and I tend to look at form analysis from a horizontal, rather than a vertical aspect. What I’m getting at there is when you pick up a form guide, you’ve basically got last run, second last run, third last run, fourth last run, etc. People want to get as many starts on a horse as they can.

I understand that, but the key to successful punting is getting a longer horizontal line. In other words, you could introduce a lot more variables about that particular run that will give you more intelligence and insight into what might have happened on that day, rather than just finishing position, beaten margin, weight carried, in running position, jockey, etc.

Some of my biggest results have come from being able to have a broader wider, horizontal landscape in terms of how I look at each horse’s run.

David Duffield: So if you’re going deeper into each run, does that mean you don’t go quite as far back as most people?

Nick Pinkerton: Yeah, I tend not to. I definitely weight recent runs a lot more significantly than obviously older runs, and I wouldn’t necessarily go much further back than two preps. The exception to that is, obviously, if a horse is first up today, I might look at his last 4 or 5 first up runs, if he’s got a reasonable race history.

When I look at that, the sort of thing I will be looking for is a horse that might be have 5 starts first up and never been placed. I’ll go back and look at each of those first up runs and along my horizontal line of variables, I’m trying to find something that is compelling enough for me to excuse, forgive, or overlook any or all of those horse’s first up runs. That’s pretty much how I’m doing things.

If I can find something that might have been unlucky at its last first up run and finished fourth in good company, and its previous first up run it finished fourth again when it should have finished much closer or its previous preparation it finished fifth when it was on a bog track and it didn’t handle it, it’s clearly a dry track horse, if I can find a compelling argument like that, then I’m getting excited about backing a horse that statistically had 5 first up runs, never been placed. If I can get what I think is a reasonable price about that horse, which almost certainly you will, you know it’s because the market’s probably looking at statistics, rather than performance.

And the wider you go with those horizontal factors, the more variables you can bring in, the more opportunity you’ve got of finding variables that might different to how the marketplace is seeing things.

David Duffield: Yeah, and it makes perfect sense. We’ve often said a lot of the, pretty much all of the commonly available form and stats that’s baked into the cake. There’s no real edge to be found there.
It’s the other stuff where you can find value. We try to do that with our own class and speed ratings. You said you do that by digging very deeply into every run, well not every run, but more importantly the recent runs.

Nick Pinkerton: Yeah, absolutely.

David Duffield: Next question was about jockeys. It says, “Do you have a list of jockeys that are questionable, so maybe not dishonest, but probably more importantly, unreliable?”

Nick Pinkerton: Yeah, I’m glad you separate dishonest and unreliable, because the dishonest element is something I just push to one side. You’ll go nuts trying to get to the bottom of who’s honest and who’s dishonest. To be honest, you’d probably go broke first.

I think the important thing is to deal with the unreliability element. I think what we spoke a lot at the beginning of this call about confidence with punters, I think it’s very important to understand confidence levels of jockeys as well. I think even very top class jockeys have runs that come in and out of confidence. I can imagine, Nash Rawiller in Hong Kong I think Nash is something like 2 winners from 109 rides in Hong Kong, I just can’t imagine that Nash is riding with the same confidence as he would have been in Sydney back in 2012 with those sorts of stats.

We all know he’s an exceptionally good jockey, and we all know he’s very capable at the top level, but how would you feel about backing him when he is 2 from 109 over there?

David Duffield: Very different to NSW like you say. Is there a question about the false rails as well and the moveable rails. How does that impact your form analysis pre-race and post-race where the rail position is?

Nick Pinkerton: It’s definitely a factor. I think the most important thing there is just to be aware of how the track is played on previous occasions when the rail has been where it’s going to be. You have some sort of expectation from a pre-race perspective, but then most importantly you need to be thinking on your feet on race day and make sure it’s playing out the way that you expected it to play out.

Or if it’s not, you’ve got to make the necessary adjustments. Probably the most recent example is Derby Day in Flemington this year. It’s unfortunate, but it’s true. It’s one of those things that happened. Anyone who was betting on Derby Day as the day played out it became more and more obvious you just did not want to be rail or on pace, and you had to make adjustments for it. Even I, myself, was a bit slow. I was too forgiving early, so middle of the day it got tougher and tougher and ultimately I thought it became unplayable towards the end. No surprise, Bonaria wins the Myer Classic on the day. Is that what it was?

David Duffield: Yeah, when she was coming home pretty hard?

Nick Pinkerton: Yeah, where she sat back widest and just came down the other side. I think that’s probably the most favourable sort of run under those conditions. Yes, you’ve got to consider it. You’ve got to have an expectation based on facts and history, but you certainly have to play it on the day. When you play it, don’t be too quick to condemn any scenario.

If, for argument’s sake, if you’ve got the first couple of races won by leaders but they’re all favorites, you have to make some compensation for that. You can’t have the first 3 races with leaders knocking up, but they’re all 15’s, 20’s, and 30’s chances, then say ahh the fence is off. No, you have to be mindful of what the horse is in various stages or positions in the race actual expectation of winning were.

David Duffield: What about this one? “I can’t bring myself to back more than one horse in a race if one doesn’t stand out for value or it’s winning hope. I stay away. Is this the correct approach?”

Nick Pinkerton: For me, I very rarely just back one horse in a race, so it’s an individual thing. I just find it’s an inherent comfort in backing more than one horse in a race, but I totally get how some people don’t.
I look at it this way. I look at them all as individual bets so they all have to stand up in their own right. I certainly am not looking at it from a point of view of saying, OK well, I’m on the second pick, the third pick, and the fifth pick, and the accumulative percentage is this, so therefore I’m on a 9 to 4 chance or I’m on an even’s chance or something like that. I want them all to be, all to represent value for their own individual reasons, and I’ll just stake them accordingly in the same event.

David Duffield: OK. Someone else has said, “I suspect that the profiles of winners are changing in particular, longer priced horses are winning more frequently than in the past. What are your thoughts on this?”

Nick Pinkerton: No, I-

David Duffield: That’s something I can research by the way, but just off the top of your head, do you think that’s being more prevalent recently?

Nick Pinkerton: Not sure. I’ve only been back since September, so I’m not sure on that. I would suggest even if it is true, just to be careful of what time frame we’re looking at, because of the nature of variance and results, if you look over a 6 month period, it’ll be different to what you’ll get over 12 month period and different again to what you’ll get over a longer 3 to 5 year period. It might not have shifted statistics over 3 to 5 year period, even though in the last 6 months that may well be valid.

David Duffield: Another one is “How successful a strategy is it to follow the money in a betting race? Favourites win a third of the time? How do you balance where the money is compared with your rating of the form?”

Nick Pinkerton: Following money is great if you can get on before the money.

David Duffield: Which is kind of mutually exclusive.

Nick Pinkerton: Yeah, so I think following money is dangerous.

That being said, one thing I do believe in is I think the era of static prices, I think the era of getting a set of market prices early in the morning and betting to those prices is gone. I think you definitely need to be a lot more aware these days of marketplace movements, and you need to have a dynamic element to your set of prices.
What I mean by that is if you’ve got the favourite evens and the second favourite 5/2, if the favourite opens 5/4 on and it’s in to 6/4 on, and your 5/2 chance opens 3’s and is out to 9/2, I don’t think you can just bet that market like evens and 5/2 chances. I think you have to sit and say what have I got in my favour with this 5/2 chance? Why am I getting 9/2 about my 5/2 chance? What could the market have possibly undervalued? What is it overvaluing about the 6/4 on chance?

If you can come up with a definitive answer for that, then I think it’s fine. Then I think you can play the race, and I think you can play it confidently. If you can’t, then you need to sit and say, right, I’m certainly not going to back the 6/4 on favorite, but I have to tamper my enthusiasm about my second pick as well.

Following money is dangerous. Backing market moves after the market move is going to put you in the poor house, but backing things that move in the opposite direction on the back of that market move is also going to cause you harm if you’re not very confident about why the edge is there.

David Duffield: Now we had a few questions about how to form a market and how to quickly frame your own market. You’ve mentioned before that you’re more of ticks and crosses, overs and unders, kind of guy. Would there be any advice you’d give someone who’s looking to frame their own market to 95 or 100%?

Nick Pinkerton: Yeah, there’s lot of little simple methodologies you can do. They’ll only give you a very simplistic sort of market, but by the same token, it’ll give you some structure, and it’ll give you some understanding of what you’re working with. A simple one might be to give a points allocation to each of your horses from something like 10 down to 1. Then you price them on their percentage of a total number of points. For argument’s sake, if you’ve got your top rated horse with 10 points, and your total number of points for all your winning chances in the race is 20, then that horses chance of winning the race are quite simply 10 divided by 20 or 50%. You price that horse even money. A horse that might have 1 point, you’d price at 5%, you’d price him at $21. Very simplistic approach, but that is some way in which you can price horses.

I think the more important thing, or perhaps the more profitable thing for people to pay attention to is just market order. I think if you look at market order, you assume if you use as a basic premise and a basic starting point, the market is pretty much right, and you work from there, then I think you’ve got a reasonable framework to start from.

By that, I simply mean when a market comes up on a Wednesday for a Saturday race meeting, put them in market order, go from the top to the bottom and see if you can pick some holes in them. If you find some obvious flaws in the credentials of the favourite, some obvious flaws in the credentials of the second favourite, then regardless of prices, if the third horse on the marketplace looks fairly solid to you, it’s clearly going to be an overs proposition.

If you follow that process from top to bottom, I think you get a clear idea without having to understand how to price them all. I think you get a clear understanding of where the opportunities may be in the race.

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