Beginners who have just come into the world of horse betting are usually confused about a whole lot of things.  They understand the basic principles about betting, but some deeper issues tend to leave them somewhat stupefied.  One example is in calculating payouts and the odds, which are usually essential to the profit motive of betting on a race and using racing tips.

In this article, I will explain the logic and art behind making money betting on horses, and other important issues that a beginner to the world of horse racing should know.  Since a good foundation in the basics, in any subject, is always an important prerequisite for future progress - focusing on these fundamental aspects of horse betting, a beginner will be primed for more advanced studies in the entire process.

Payout: 

In calculating payout, picture this: Imagine that the sum of $50,000 has been bet collectively for a win on all the horses in one particular race.  For the purposes of profit, a betting outfit will collect a certain percentage of this entire amount.  Percentages tend to differ depending on the particular betting outfit in question.  However, for this example, we could look at such a percentage as 10%.  This means that having subtracted $5,000 (10% of $50,000), the remaining amount in the betting pool is $45,000.

If, for example, a favorite horse 4 wins, the winning pool of money would be shared out amongst all those who bet on horse 4.  If the amount collectively bet in this horse was shared equally between 500 people making a collective bet of $5000 on horse 4 (a $10 bet per person), we would have a payout of $90 per person.  This is essentially the $45,000 divided by 500.

Odds:

Understanding payout, we now proceed to odds.  Simply defined, odds stipulate the estimated chances that a particular horse will win a race and what you will earn if you bet on those particular chances.  The odds are usually greater among favorites, and you should be aware of this before applying any horse racing tip.

In the payout example above, in order to calculate the odds, we first have to make some primary calculations to get a figure called the breakage, which is the calculation of the return on a $2.00 wager made to the nearest 10 cents.  For example, if the actual division of the pool comes out to $8.64, the official payoff/payout is $8.60.

Most odds are calculated based on $2.00 wagers or bets and increments of this amount.  So, for our example, first of all we have the amount which remains in our betting pool: $45,000.  We then subtract the total bet on horse 4, which is $5,000.  This leaves us with $40,000.  $40,000 is then again divided by the $5,000 figure which gives us $8.00 as the breakage amount.  This would give you the odds of 8-1, meaning for every dollar you bet, you get a payoff of $8.00, assuming horse 4 wins.  In reality, these odds would be calculated in $2.00 bets.  This means odds of 8-1 would effectively be 16-2, which effectively means the same thing.  For every $2.00 bet, you stand a chance of making $16 if horse 4 wins.