Australia's first lady of racing Gai Waterhouse doesn't have a runner in the Melbourne Cup but she's still a crowd favourite in the annual parade.

Waving from a horse-drawn carriage, Waterhouse had a smile from ear to ear as the parade made its way through the Melbourne CBD on Monday.

"It's sensational. Look at all these wonderful people, just fabulous," Waterhouse said.

Her horse The Offer has been scratched from the big race but Waterhouse is still a crowd favourite with "Gai" being screamed by thousands behind the barriers.

Bagpipes playing Waltzing Matilda led the procession of jockeys and trainers sitting atop convertible cars.

Nick Hall, who is riding Australian-bred and trained Fawkner in the Cup, said the parade is what it's all about.

"We look forward to this. It's a real celebration of racing," Hall told AAP.

"Here's hoping for a result tomorrow."

Giant inflatable sumo jockeys flanked Cavalryman jockey Craig Williams' car.

A smiling Williams waved to the cheering crowd passing out signed caps to a lucky few.

"Can't wait for tomorrow, this is just the best time of year," he said.

"Great to see so many out."

Champions past and present were celebrated along the parade route.

Dancers tapped along Swanston street with placards celebrating Phar Lap's historic win.

British import Gatewood's jockey William Buick said the parade was incredible.

"It's just incredible, it's amazing how the city just stops for this," Buick told AAP.

"There's nothing like this anywhere else."