If you listen to the “trading gurus”, you could be forgiven for believing that the odds on the favourite and second favourite have a simple inverse relationship.

I’ve heard trading gurus explain their decisions to stay in a trade using explanations, such as:

  • The favourite is getting backed; therefore, the 2nd favourite is likely to drift
  • The 2nd favourite is drifting; therefore, the favourite is likely to shorten
  • The favourite is drifting; therefore, the 2nd favourite is likely to shorten

As most of these trading gurus have a course or a product to sell, it’s important to separate fact from fiction.

Most sales people will say anything to increase sales. If they can get you to believe that anyone can get rich by trading, you are more likely to buy their stuff.

A. Odds Probably Change Simultaneously

These statements imply that the bookmakers and betting exchanges alter the odds using 2 steps, that take place at different times. Let’s say that, you are watching a race at a betting exchange and you see the odds on the favourite shorten.

The 2 steps would be:

Step 1: They shorten the odds on the favourite
Step 2: They lengthen the odds on the second favourite

Between steps 1 and 2, the trading guru has enough time to tell his YouTube audience, “the odds on the favourite have shortened and therefore, the odds on the second favourite are likely to lengthen”.

Is that really how it happens in a computerised world? If a horse shortens in price, I would expect the odds on another horse to lengthen simultaneously.

At betting exchanges, you can see the total race percentage above the back and lay columns. In a reasonably strong market, the total race percentage on the back column is usually between 101% and 103%.

If the odds were not moving together, I would expect to see the total race percentage drop below 100% occasionally.

B. Two Horse Races

To be fair, the logic that changes in Horse A’s odds will affect Horse B’s odds will be true in a 2 horse race. However, I am not convinced that the odds won’t change simultaneously.

C. Two Strongly Fancied Horses and the Rest of the Field are Outsiders

Is it possible that there is an inverse relationship between the favourite and second favourite’s odds in some races with more than 2 horses?

How about in a big field, where 2 horses have short prices and the remainder of the field could be classed as outsiders.

1. A Recent Example

Yesterday (the second day of Glorious Goodwood), I had an interest in the Qatar Sussex Stakes (Group 1). There were 2 short priced horses and the rest could be classed as outsiders.

The names of the favourite and second favourite were, Ribchester and Churchill, respectively. Ribchester started the day at around 2.0 (but was odds-on at most bookmakers), while Churchill was around 2.88. During the day, both of these horses drifted. The last time that I looked at the odds, Ribchester was around 2.1 and Churchill was about 3.3. They didn’t drift massively. However, their odds were clearly lengthening.

The third favourite, Zelzal, started the day at 10.0 and came in to around 8.0.

2. All Money Affects the Market

The point is that, if a third horse is attracting money, the idea that fluctuations in the odds of Horse A will change the odds of Horse B in a predictable manner is not true. 

I was trying to do something with Churchill.  However, he got withdrawn shortly before the race.  Therefore, all my bets were cancelled.  A complete outsider won the race.

At the start of the day, the odds on the favourite and second favourite added up to around 84%.  Admittedly, this is a single example.  However, it shows that, even in a race, with 2 horses that are highly fancied, a third favourite can affect both odds.

Obviously, the idea that “The favourite is getting backed:  therefore, the second favourite is likely to drift” would be even more unlikely when:

  • The odds of more than 2 horses are in the favourite range
  • Several “outsiders” are attracting back bet money

You don’t know how many attempts that they have had to make their video. Often, they will record the audio, after they have recorded made a screen capture recording.

Therefore, when they record their voice, they already know, which odds have changed and in which direction.

Even if they record their voice at the same time as they are making their trades, if it all goes wrong, they have the option of scrapping the video and creating a new one.

D. Conclusions

When the price on a horse changes, the compensatory price changes on other horses, are likely to occur simultaneously.

When a favourite gets backed or drifts, the compensatory odds changes may not necessarily occur on the second favourite. The second favourite’s price can stay stable or even move in the same direction as the favourite, while the odds on other horses move in the opposite direction to the favourite.

I have seen loads of races, where the odds of 2 or 3 horses are shortening just before the start of the race.

If you go on Oddschecker (oddschecker.com), you will see that horses are colour coded (shortening, blue; lengthening, pink; staying stable, white). When you look at a selection of races, you will notice that the odds on several horses are shortening and lengthening in the same race.