There’s no questioning it. The odds API news this morning is shocking the ZED metaverse  and especially us here at KYH. Our access to what many consider to be the most important and telling feature of their horse is gone from our site, and likely will change in some drastic way after 4-6 weeks according to the Dev team. However, one thing still remains abundantly clear to me. There is serious money to be made. But the lottery ticket, toss your horse into a griffin and instantly double its value market may disappear forever. Those willing to race their horse and create a proven track record will dominate the market in terms of racing, breeding and overall value. In a world with no immediate odds that give you a glimpse of your horse's ability, what do you do?

In my career as a professional day trader, I never know the odds of a new strategy I am working on, until I put it to practice. I do my due diligence, study chart patterns, trade on the demo and see what time of edge I have. We detailed the concept of Expectancy in part one of this mini-series and its utilization is more important than ever with potential changes coming to ZED. If you want to race your horse, and see how it competes, you must have an understanding of how to budget your racing capital. 

Let’s do a thought experiment, with roots in expectancy and risk management. You buy a newly minted, unraced, z10 genesis buterin colt. Shiny and wide eyed, you decide to test its merits. Luckily for you, after your griffin you will be allocated into a race class with set costs of entry that vary for different tranches of risk. You budget $100 dollars into your racing pool. To ensure you stay in the game long enough to figure out what you have, you start with free and $2.5 dollar entries. Think of that $100 dollars as your account. $2.5 dollars is 2.5% of your account, allowing you to lose 40 times in a row before being unable to race. Mix in some free races whenever you can and you should be able to get 50+ races in for a relatively small budget. Following these 50 races, you hopefully have a pretty solid idea of your horse's distance preference, win/place/show rate and initial profitability. 

Take that initial sample size of races, use the data available on the site and calculate your horse's current expectancy. What can you expect to return off of every $1 dollar you invest in racing given the current strategy you are using? Keeping your buy-ins consistent will be critical in maintaining your capital and deciding to “tier up” and increase your buy-ins to face stiffer competition! If you are consistently profitable and your account has grown, moving into the next buy-in tier is the next move!

Consider increasing your buy-ins as sizing up. Now you risk more per race, but also see higher reward. Continuing to track win rates, profitability and expectancy after every race will help you see if your strategy (distance preference, class, buy-ins) can be scaled! For a horse like Vanilla Bean, we started small in 5-10 dollar races, and once we noticed a strong win rate and profitability, we continued to enter more and more expensive races to capitalize on her abilities. This is what each and every racehorse owner will have to do as well! We never should see the odds of our horse and say “my horse pulled sub 6 odds in its first 3 races, let's jump to class II 50 dollar buy-ins”. That is gambling. Learning how to manage your WETH balance as you continue to learn your horse is what makes this a skill-based game. Keeping buy-ins consistent, only growing when you’ve accumulated profits and a known win rate, and paying attention to how your strategy performs over time is how to think like a professional. Soon we will have features like Profit/Loss tracking and charting, and an expectancy calculator for every horse to aid in making these decisions. Long term, these changes will cause a larger skill gap and gradient across classes. It will take much more time, effort and capital to confidently compete at the higher levels. The fact of the matter is that this is GOOD for the game. When millions of dollars are at stake there simply must be a barrier to entry. We will continue to help navigate this space and aid the average user so that they, and their horses can be competitive. Below for your reference is an extremely useful cheat sheet for tracking your profits and managing drawdowns (a string of losers) courtesy of a well-known trading journal called Edgewonk (R-multiple is simply cost of entry/potential reward). The principles it discusses are easily transferable here, and I hope they help. Stay positive out there!