# Make Money From Monte Carlo

I’m not talking about the place, I’m talking about the method. You may not have heard of this phrase before, and if you haven’t then you would be easily forgiven. It’s usually only talked about by geeks with statistical degrees. But when it comes to betting, we should listen to them and this method can be very powerful when employed on your betting.

That’s why today, I want to break it down for you into an easy to understand concept that doesn’t require a degree to use.

As with most statistical information there is a certain level of pleasure gained by the users of it in keeping it as complex as possible. In fact, often the ground level of what is being done can be easily explained without all the technical information that you don’t need to know!

So let’s get down to it, what is the Monte Carlo Method?

Very simply it is the process of repeating an estimation or simulation multiple times with a certain degree of variance and then seeing how often different results occur.

In terms of horse racing we can imagine it as running a simulated race 10,000 times and seeing which horse wins the most! There is a very high probability that this will be the strongest horse in the race.

A great idea isn’t it. The problem is… how do we simulate the race?

And that’s the tricky part. But as you know, anything worth doing requires a bit of time spent and I’ve already done a chunk of it for you!

Like anything, it’s possible to make this very complicated, and the whole purpose of this article is to de-mystify the method. So what I’m going to do is show you a very simple approach that you can use in your own betting analysis, starting…

…RIGHT NOW!

We are going to need something to compare the runners in a race, and the most obvious information to use is a rating. This can be the Official Rating, Top Speed, Racing Post Rating or some other rating. It doesn’t matter but it should be a rating you believe in and trust as a good representation of a horses ability.

Then we need to determine the variance of the rating. Ratings are just estimates and the true figure could be a little bit either side of the rating. If you’re unsure then a good place to start is 10% either side of the rating to give you a range of what the true rating could be.

Now we have everything in place to do our simulation. This can be done in Excel or any other spreadsheet program.

We calculate a variation of each horses rating by increasing or decreasing it by a random amount with the variance range we have chosen.

Look to see which of the horses have the highest rating and mark this horse as the winner.

Refresh you screen to get another random amount in the variance range and check which horse has the highest rating again. Mark this as the winner.

Repeat this process as many times as possible and you will start to see a pattern appear.

Now the highest rated horse is going to win most often, so how does this help use with our betting. It helps us because we can convert the amount of wins a horse has achieved into an odds line.

If we’ve done the simulation 100 times and one horse has won 34 of those simulations, to work out what the odds should be on this runner we do:

34 divided by 100 = 0.34

1 divided by 0.34 = 2.94

We would expect the odds on this runner to be 2.94. If they are higher then we have found ourselves a value bet. If they are lower then we have a bet that is not offering us any value or long-term profit. In this situation we can either look for another horse in the race to bet on that has a good chance of winning and is offering value, or simply move on to the next race.

You can download an Excel spreadsheet that performs this simulation for you 10,000 times here.

so would u use atr predictor

Personally I wouldn’t because I don’t know how the ATR predictor works and I like to understand what something is doing before I rely on it for analysis.

How dare you give something away for free when I use something very similar myself for my own betting! Joking aside, it is great to see that someone else is doing this and I am not completely mad. My own “simulator” only runs the races 200 times and includes allowances for weight. I also have 2 ratings instead of 1 – a minimum and a maximum so that the final rating will randomly fall within the range – similar to your variance but allowing for the fact that some horses are better/more consistent and are likely to run in a narrower range. Your spreadsheet has already given me a few ideas on how to improve my own, thank you!

Mike

Hi Mike, thanks for your comment. There are absolutely other people doing this and it is a very good technique. Using a standard deviation that is horse specific is a very good way of adding variance in. 🙂

Thanks for the standard deviation tip, I’ll give it a whirl.

Mike

thanks for a great tool download.,am a noob with excel i would like to add more horses(upto 20) please, without breaking it.

To extend it you need to select the last row, columns A to N and then copy these formulas down as many times as you want.

I HAVE A COMPLICATED SYSTEM FOR DOG RACING, I CAN RATE ALMOST ANY ASPECT OF DOG RACING FROM AN INDIVIDUAL BASIS TO AN ALL – IN FACTOR BASIS.

WOULD THIS SYSTEM WORK WITH MY RATINGS FOR DOG RACING, USING EITHER MY RATINGS OR THE PUBLISHED RATINGS SUCH AS RPR, ART ETC.

Hi Brian, you can use this principle for any type of sport.

Nice explanation! Although the Monte Carlo method used in my ratings is a little more sophisticated, I wish I had read your article years ago as it would have as you say demystified what is a simple concept

Thank you. As you say it can be made more complex but I wanted to show that it doesn’t have to be. 🙂

Hi Michael,

I am a bit confused at the Moment. I just checked Hammody´s last race today. At the Racingpost site its last RPR from 17 Jan 2014 is 57. At your Monte Carlo software the rating from 17 Jan is 60. How could that difference be?

Hey Fabi, we only get certain updates from the Racing Post, these are 24 hour declarations and post race results. Sometimes they may change this again24 or 48 hours after the race.

hi michael

can you please send me a download of monte carlo system also do you have a downloadable puntology system

cheers frank ps thanks for your enjoyable readings

Sorry forgot to say you can get the free Puntology tool at http://www.puntology.com

Frank, just so you’re aware, we’re no longer supporting the Monte Carlo Software as we’re looking to move it to an online tool. However you can still download it from https://s3.amazonaws.com/anonymousgingerapps/The+Monte+Carlo+Manifest/MonteCarlo.air

Hi Michael, I am a student I just want to know why did use the variance in your calculations ?and if I want to use the standard deviation how is the equation going to change ?and it would be appreciated if you explain this equation for me :=RANDBETWEEN(B$13-(B$13*$O$12),B$13+(B$13*$O$12))

We use variance because a rating is never 100% accurate, so you need to allow for error. Without digging back into the formulas I’m not sure what would need to change in the equation. The section above generates a random number which can then be used for adding a factor which takes into account things happening in a race that you can’t plan for.

We would expect the odds on this runner to be 2.94. If they are higher…. higher than what ?can you explain it further…..

Hi, If the simulation is correct and history repeats itself, then the correct probability of the horse winning is 2.94. If we multiply 2.94 by 34, we get 99.96 (as close to 100 as you can get). Let’s say, for example, the horse is priced up at 3.5 in the market, then we have found value. Based on our simulation, if we were to back the horse at 3.5, we multiply this by 34 to get 119. This means that we would make 19 points profit or a 19% ROI over 100 bets. Hope that makes sense and let me know if you need anything else. Eddie

Hi Mate, Thanks for wonderful article. But, in most of the time we pick only Fav horses. Is there any way to pick Non Fav horse as well.