• Simple guide to framing a market and producing rated prices that allow you to bet to value
• What do the pros use to produce their markets? See the inputs below

We’ve had a few questions from punters about framing a market, and how those precious rated prices are arrived at.

It’s a fine art. Every analyst has their own approach, and it’s quite rare you’re going to see under the bonnet at exactly what goes into their markets. If they have an edge, they’ll want to protect it!

However, we can go into some basics so that people can at least get an idea of the process.

##### Framing a market: the inputs

To do these calculations, however, you need some basic inputs:

1. Ratings: there’s Official Handicap Ratings (OHRs) that you’ll find in industry formguides, but professional punters put together their own ratings for every horse for an upcoming race, and they can take into account a number of form factors. This is generally where the successful punter will have an “edge” that allows him to predict performance more accurately than the market.

2. Weight / Probability Scale: this is another subjective measure that will differ by punter. Taking traditional weight ratings, which measure how much weight each horse should be handicapped, this scale is used to calculate what those weights mean in terms of the horse’s chances of winning the race. Punters refine this scale to suit their own purposes

3. A ratio to convert the two: this will differ depending how the punter’s ratings work. In our example below, 1 ratings point = 0.75 kgs.

##### Framing a market: ratings

The basis of pricing horses is a rating that the punter gives each horse for the race.

Rating horses is an entire process in itself and can depend on a myriad of factors that the punter may include. Without getting into that now, let’s put together a small sample race with a rating for each horse.

 Horse Rating Points off top rater A 100 2 B 98 4 C 99 3 D 102 – E 96 6

Every horse has been assigned a rating, and we’ve included a column that shows how many points each is from the top rater, which is Horse D with a rating of 102.

Simple so far!

##### Framing a market: applying probabilities

What we have to do now is take those ratings and figure out what probability they give each horse of beating the others in the race.

To do this, we’ll use a weight / probability scale. This is yet another subjective area. The process was first outlined in detail in the 1980s, when the famous Don Scott wrote his Winning series of books. Many have taken the basic scale and modified and refined it to suit their approach.

To at least give you an idea of how it should work, we’ll just use a very basic, abridged version of the original Don Scott scale.

 Kgs off top rater Probability scale 0 1 0.5 0.9 1 0.8 1.5 0.67 2 0.57 2.5 0.5 3 0.4 3.5 0.33 4 0.25 4.5 0.2

The table shows the probability factor that should be applied to each horse, based on how many kilograms it is off the top rater.

The top-rated horse in the race has a factor of 1 applied. If the next horse is 0.5kgs behind on your weight ratings, it gets a factor of 0.9. And so on.

But how do we know how many kilograms of weight to apply to each horse?

We have to go back to our ratings. We mentioned how everybody’s ratings are different, tweaked to what is successful for them. Whatever our ratings scale, the purpose of it is to allow the punter to accurately handicap each horse with an appropriate weight.

##### Framing a market: converting ratings to probabilities

So what do we need to know? How many kilograms to apply for each rating point.

Yet another piece of the puzzle that has to be worked out!

In our example model, 1 ratings point = 0.75 kgs. So we’ll apply that to covert ratings points to kilograms.

 Horse Rating Points off top rater Kgs off top rater (1 pt = 0.75kg) A 100 2 1.5 B 98 4 3.0 C 99 3 2.3 D 102 – – E 96 6 4.5

From there, we can simply use the scale to apply the probability factor.

 Horse Rating Points off top rater Kgs off top rater (1 pt = 0.75kg) Probability factor (from scale) A 100 2 1.5 0.67 B 98 4 3.0 0.4 C 99 3 2.3 0.54 D 102 – – 1.0 E 96 6 4.5 0.2 Total 2.81

Finally, we just convert these to market percentages, and then prices.

 Horse Rating Points off top rater Kgs off top rater (1 pt = 0.75kg) Probability factor (from scale) Market Percentage Rated Price A 100 2 1.5 0.67 24% \$4.19 B 98 4 3.0 0.4 14% \$7.03 C 99 3 2.3 0.54 19% \$5.20 D 102 – – 1.0 36% \$2.81 E 96 6 4.5 0.2 7% \$14.05 Total 2.81 100%

We’ve produced a 100% market, but this can easily be changed to 90%, 85%… whatever the punter prefers. Many punters calculate their markets to a lower percentage in order to build in a margin.

So yes… there is a fairly straightforward process to putting together a rated market. All you need is the inputs – conversion scales and ratings. Unfortunately, that’s the hard part!

##### Framing a market: keen to know more?

A little while ago, the pro punter behind our Key Bets membership, Cameron O’Brien, put together a webinar all about pricing horses. It covers all of the above and much more… so check it out if you’re curious!

Pro-punter Cameron O'Brien knows how to find value winners at big prices. He's done it time and time again for his Key Bets members. They get all of Cameron's tips from right across Australia, including stake, recommended price and runner comments.

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