For the uninitiated, a horse racing betting system is a method of placing bets on horse racing according to a set of pre-defined premises or rules. Notwithstanding the vast number of variables that can incorporated, horse racing betting systems essentially fall into two categories, those that you develop yourself and those that you acquire from a third party, free of charge or for a fee.
In the case of third party systems, you’d hope that the supplier would be able to provide you with independently proofed results of the system in action for a period of months, or even years, including the period since it was first made available to the betting public. In other words, what you’re looking for is demonstrable proof that any system has been forward-tested, with real results, rather than just back-tested and therefore probably back-fitted to a pattern of favourable results in the past. The absence of such independently proofed results and/or rules that apparently make little, or no, logical sense are usually signs that a system has been back-fitted.
The ‘past performance is no guarantee of future results’ applies equally to horseracing betting systems as it does to other form of financial investment and should be your mantra when testing your own horse racing betting systems. Otherwise, you could be pinning your hopes of profitable betting on a statistical anomaly, or a series of such anomalies, in the past.
Once you’ve produced a list of rules on which to base your horse racing betting system, if you have the inclination, money, technical expertise and time, you can give yourself a head start by creating, or acquiring, a horse racing form database on which to test the profitability of your system. Various database offerings are available from the likes of Dataform, Proform, Raceform Interactive, Smartform and Timeform, while HorseRaceBase offers a System Builder tool that allows you to quickly test your proposed system on results for the last three seasons.
Nevertheless, however conscientiously you back-test your betting system, you’re still faced by the inevitable prospect of forward testing it, on paper only, for a significant period to determine if it’s as profitable as you originally thought. You can paper trade your system by recording your selections, profit and losses in a Microsoft Excel spreadsheet, but it’s vital that you do so, accurately, until the system has generated at least one hundred selections and preferably two or three hundred.
At that point, you can analyse your results to determine your likely strike rate, longest losing run and return on investment when you start to bet on your selections with real money. This information is not only crucial to determining the profitability of your system, but also the size of an adequate betting bank from which to operate it. You can also calculate another simple statistic, known as the probability of negative return, which you can read about, at length, here.
Without the added confidence of paper trading, you may find that you lack the patience to operate your system to its full profitability. If you’ve backed tested your system with hundreds, or thousands, of past results and your first, say, half a dozen, live selections lose, you may have second thoughts and prematurely confine a perfectly viable system to the scrap heap.
Furthermore, paper trading will also allow you to familiarise yourself with the quirks and nuances of your system, such as the amount of work involved in arriving at selections, the typical number of selections per week and so on. You may also discover, during paper trading, that by tweaking your selection criteria slightly, you can improve the profitability of your system or tailor it more closely to your betting needs.