How many pockets do you have?  How many do you use?

What am I talking about, you ask?

I am referring to the difference between returns and risk.  If you are using one bankroll to make every wager, you are probably not doing yourself justice.  Think about it.  If you can make a positive return on win wagers, but consistently find yourself challenged by exotics (those wagers that depend on multiple outcomes), why would you lump them all together?

Win, place, show wagers are very simple and straight forward.  But it all starts to get more complicated once you go beyond those.  Some of the wagers that are out there are enticing with large payouts and carryovers.  Some wagers actually make sense when dealing with multiple favorites.  But that doesn't preclude the fact that those wagers are a much lower percentage strike rate for most.

To become familiar with what is needed to hit some of these type of wagers you only need to watch one of the horse racing networks for an afternoon.  The bankrolls that they use and the multiple horse selections for their tickets are well documented, as well as the multiple loses they encounter.  

You need to have deep pockets to continue down those roads.  Or a way of revitalizing your "exotic" bankroll.

I like to look at it this way:  

The wagers that I am most successful with will have the largest bankroll.
From there, I will pull costs and fund my exotic bankroll.
I maintain strict limits on the amount of the exotic wagers, specific to wager type and expected returns.

That last statement is what I will be touching on this week and next.

With the Math Behind the Method I provide you the opportunity to be as selective as you wish with its guidelines.  Wether you opt for tight parameters with fewer qualifiers or less restrictive parameters for more qualifiers you will come across situations where an exotic play is more cost effective.

First let me state that in the book I provide the formula's to use.  It is advisable that you create the charts for the most common race sizes as that will expedite the process and give you the ability to check races you might not have considered playing, if processing the information prior to race time.  It just makes it easier.

So, let's say you have a qualifying horse in a race that offers a daily double (winners in two consecutive races must be selected).
That horse is also a heavy favorite.  Where you would normally play a win, place or show wager you are now faced with a situation where the return is not worth the risk.  The daily double can be another option.

In this instance there are a few lines to take, and value is the key.  The first thing that I will usually look for are those horses in the second leg of the double that are not over bet in the double.

To see if they are over bet I see what a current win parlay might pay as compared to the payout of the double.

If the first leg favorite is paying $2.40 to win and a horse in the second leg has a morning line of 4-1, a parlay may pay $12.00. That is the $2.40 return on win wager one put into win wager two, returning $10.00 for every $2 wager.  2.4 X (10/2) = 2.4 X 5 = 12.  (The win return is calculated as the per dollar wager (odds) plus the wager- (2 X 4) + 2.)

If the double is paying more than $12 on a $2 wager it provides good value.
If the double is paying in the range of $4 to $12 it may be considered acceptable.  If not, pass, as the risk does not warrant the return.

The more horses that are used in the second leg of the double, the higher the return will need to be in order to justify the wager.

To be considered an "acceptable" wager I look to the return of the lowest double compared to the cost of the wager vs. the win odds of the first leg horse.

In the above scenario, if $12 is the lowest double payout, what would be the  number of horses we could use for the second leg?

The win odds of the first leg horse .2 - 1, or 1-5.  One wager gives us a 5-1 return on the double.  Two wagers, 2-1.  Three wagers, 1-1.  Four wagers, .5-1 or 1-2.  Five wagers, 1.4-1 or 7-5.  Six wagers, 0, or break even.

These are shown as- (12 - x) / x , where x = amount wagered in $2 increments.  (12 - 4) / 4 = 2.

So six wagers is $12, put to win on the horse in leg one would return $14.40.  That many horses in leg two is not acceptable. A win wager on leg one of $12 would be.

Five wagers is $10.  Put to win on the leg one horse returns $12.  Our break even, still justifying a win wager of this amount rather than the double, a higher risk wager.

Four wagers is $8.  The payout on win for leg one is $9.60.  Less than the $12 for the double, thus making 4 horses in the second leg our 'cap', providing that $12 is the smallest payout of any of the four wagers.

You need to keep in mind that the daily double wager is dependent on hitting the winner of both races, simply choosing random horses for leg two won't keep your strike rate high enough so you need to do some handicapping or use professional selectors (there are many 

What we have done is limit the bankroll exposure compared to the risk vs. the return.  There are no guarantees in horse racing and there will be loses. It is up to you to be responsible and limit your exposure to those loses by seeking out the best value for your money.  Risk the least amount to gain the best return.

And don't worry, it may appear daunting at first glance, but the math becomes second nature the more you apply it.

Until next week, luck to all!

If you don't currently track your results and keep records of your wagers it is imperative that you start.

This is important so that you can see wether your wagers are not only hitting at a decent strike rate, but just as important, making you a profit.

What is a good profit?

Well, when looking to other investments, a return of 3% isn't that bad.  You may need a higher return due to expenses though.

Ok, 3% isn't sexy.  Hell, it might not even be worth the effort for you.  Then what you need to do is work on increasing the return.  But first do a little research.

Look at what those huge money grubbing oil companies make annually, as a return percentage.  Not what you thought.  The truth is that large companies from oil to wares make their returns through volume sales.  Their margins are really quite tight.

Check out the average returns in the stock markets.  Aside from the few ipo's that explode (those rare long shots) most have meager growth if any at all.

So you may consider changing the way you look at your strategies with respect to horse racing.

A horse that pays $2.80 to show is offering a return of 40%!  

The rub, you need to have a high enough strike rate to keep that return in that zip code.  50% hits won't cut it unless your returns are greater than 

A horse returning $4.00, whether to win or to show providing it is the wager you are using, is at best a break even at a 50% strike rate.  

Simply put:  The lower the return, the higher the strike rate needs to be.
                  The lower the strike rate, the higher the return needs to be.

With the Breeder's Cup around the corner, I will touch on a few ways that you may be able to increase either your strike rate or your return.  You may have heard of some of these in the past, or maybe they will be new to you.  Regardless, just as in any business, or hobby that can pay for itself, the old adage is true- if you aren't growing, you're dying.

The continued pursuit of knowledge and the understanding of the industry is what will eventually set you apart from the rest of the field.  That knowledge prepares you for what is to come, gives you the confidence to act when the advantage is yours, and understand that at the end of the day you are dealing with flesh and blood.  Not every result will go your way no matter how good they may appear to be.  But that is part of it, that is what makes those opportunities that enable you to succeed become even more precious.  

Until next week, best wishes to all!