How to cope with losing runs

One topic which seems to crop up regularly, Dear Reader, is that of how to manage losing runs. I am a firm believer in the ’safety first’ approach to managing risk and I think it is imperative any newcomer to betting is aware of the worst case scenario. A losing bet is rarely a good thing, but what happens when several losing bets come along in succession?

When a bad run comes along, it is only natural to find yourself doubting your own ability, and fearing your skills have deserted you, or your system has failed.

If you can come to some conclusions about what may possibly happen, ahead of time, then you will be better able to manage your expectations. This in turn will empower you to better manage your money.

Prepare for the worst, and if it ever happens, well, you are prepared!

Have you ever been following a system that claimed to return good long term profits, which suddenly took a nose-dive? The losing run went on and on for what would seem like an eternity. Troubled by the losing spell, you quit following the system. A few months down the line you hear that someone else has been making a killing with the very same system. This has happened to me a couple of times before now! It is a matter of confidence.

Psychology plays a massive role in the success of a punter. You can research and develop a killer betting system, or a cutting edge race ratings program, but it will count for nothing if you cannot maintain a balanced and disciplined state of mind.

You will often hear the phrase ‘money management’ banded about in articles about betting. And with very good reason. Money management can mean the difference between making a profit and making a loss.

A successful gambler has many facets to his personality, and his ability to professionally manage money is without doubt of equal importance as being able to identify winning bets. You can be an expert form reader, with a reliable handicapping method, but still be losing money through reckless money management.

As an extreme example, you could have a system with a 99% success rate, but if you stake your entire bank on each bet, eventually you will lose, and you WILL be bankrupt.

There are three key areas to which you should pay close attention if you are to improve your money management skills:

1. Keep detailed records of every bet

2. Do not over bet compared to the size of your betting bank

3. Eliminate emotion from your betting

Many strategies exist which present themselves under the banner of ‘money management systems’. They claim to turn losing strategies into profitable strategies. Just as turning base metals to gold has long been a dream of man, transforming bad bets into good ones is a mathematical impossibility.

If your method loses money there is no money management strategy can stop it losing money indefinitely. Some will keep losses at bay for a while; some will actually exaggerate your losses; but ultimately you will lose because your method is a loser.

Many so-called money management systems involve bet recovery. This is where you attempt to recover losses from previous bets by increasing your risk on subsequent bets. It is sometimes known as ‘progressive staking’. Bet recovery can be a financial time-bomb. It may be set to explode tomorrow, next week, next month, next year even. But trust me, it will go off in your face at some point – guaranteed.

At this point I will go out on a limb and comment that when it comes to bet recovery “never say never”. When you have reached a level of experience, and you REALLY know what you are doing, then controlled bet recovery may be appropriate. Suffice to say that an inexperienced punter should avoid being seduced into thinking that bet recovery is a ’silver bullet’. There is simply no substitute for a genuine betting strategy, with a genuine edge.

If your chosen method is producing a 10% Return On Investment (ROI) on average then you should expect to lose for one, two, even three successive days or more on a regular basis. It would also not be extraordinary to suffer consecutive losing months. If anyone tries to tell you this will not happen, then ignore them. It does happen.

Standard Deviation is a method you can employ to give you an idea of potential swings in your results, away from your average. You can work it out with this formula:

Square root of ( number of bets x win probability x losing probability )

Let’s take an example of a punter who has a win strike rate of 45% with average winning odds of 7/4 (which is 2.75 in decimal odds as you will find on Betfair)

Typically, when he places 100 bets he will see returns from 45 bets, each at an average value of 2.75

His profit equals 45 points x 2.75, less the original 100 points staked, which leaves a fraction over 23 points.

The Standard Deviation over 100 bets when applied to his strike rate of 45% would be:

Square root of ( 100 x 0.45 x 0.55 ) = 4.97 (rounded up to 5)

On average he will win 45 bets in each 100 bets. But in practice 68% of the time his number of winning bets will fall within 1 Standard Deviation (SD) of 45 winning bets, ie 45 winning bets, plus or minus 5

95% of the time his number of winning bets will fall within 2 SD of 45 winning bets, ie 45 winning bets, plus or minus 10

Nearly 100% of the time his number of winning bets will fall within 3 SD of 45 winning bets, ie 45 winning bets, plus or minus 15

This means that in any given 100 bets it is possible he would win only 45 minus 15 = 30 times and still be within the laws of Standard Deviation.

30 winning bets at an average price of 2.75 would return 82.5 points and after subtracting the original 100 points staked, it leaves a loss of 17.5 points.

On the other hand, it is just as likely from a statistical point of view that he could win 45 plus 15 = 60 times.

But the point is that you could have a positive edge with a given strategy, yet still make a loss over a significant number of bets, and still be within your Standard Deviation.

This may sound a bit scary, even defeatist. That was the idea. But as you will hopefully have come to appreciate by now, I will always show you the downside to betting as well as the positive. It’s my duty of care to make you aware of these things.

But you should now be in absolutely no doubt that although losing runs do happen, it is not necessarily a reflection on your winning ability. This is where your ability to remove emotion from your betting comes in. If you typically bet to higher odds, then losing runs will by definition be much longer and more frequent.

So, having spent quite a few column inches discussing money management in detail, what is the best strategy? If you are a relative newcomer I would have to recommend simple level stakes. Divide your available betting funds according to your chosen approach – backing, laying, or trading – and bet to equal unit stakes.

When your bank has doubled, then consider doubling your stake. It is an uncomplicated approach, and when you can make a profit this way, if it interests you and does not detract from your efforts to research more betting niches, you can consider other tactics to leverage and enhance your profits further.

I have outlined some guideline notes on staking below, depending on which of the three main approaches you are going to adopt. These are directed more towards betting on horse racing, but will also prove sensible when applied to sports betting in general.

Backing: When starting out, I suggest you steer away from high odds strategies and concentrate on bets at the top end of the market, the shorter prices.

The size of your betting bank should really depend upon your success strike rate. In simple terms, if you enjoy a high strike rate then you can divide your betting bank into fewer unit stakes, because your losing runs are likely to be short. For example, a 20 point bank would mean you stake 5% of your funds on each bet. A 50 point bank, and you bet 2% each time, and so on.

By contrast, a low strike rate achieved by following a method that focuses on ‘outsider’ bets and ‘long shots’, will invariably be associated with longer losing runs. In these cases you should divide your bank into smaller unit stakes accordingly. For example, a 100 point bank and you bet just 1% unit stakes. A 200 point bank and you risk a mere 0.5% of your total bank on each bet.

Personally, I like to prepare for the worst potential losing run, and risk 20% of my betting bank going down the river when disaster strikes. This leaves me still with 80% of my capital with which to stage a recovery.

For those who have no wish to engage themselves in the mathematics of losing runs, I have taken the liberty of creating a ready-reckoner which contains the maximum number of consecutive losing bets for systems with strike rates between 5% and 95% in steps of 5%.

You should scan down the strike rate column until you see the strike rate figure that is closest to that of your selection system, and then read the corresponding ‘Max Losing Run’ figure to arrive at the maximum length of the losing run that you should expect your selection system to encounter.

Strike Rate	Max. Losing Run
5%	135
10%	66
15%	43
20%	31
25%	24
30%	19
35%	16
40%	14
45%	12
50%	10
55%	9
60%	8
65%	7
70%	6
75%	5
80%	4
85%	4
90%	3
95%	2

 

So, we can now calculate the maximum number of consecutive losing
bets that we are likely to encounter with every 1,000 bets. For example, if we enjoy a success rate of 20% we would be wise to prepare for a losing run at some point around 31 bets. With a higher strike rate of 45% we should still expect to be hit with a losing run of 12 bets somewhere down the road.

If you want to follow my lead, and be prepared to sacrifice 20% of your bank in the event of an extreme losing spell, then simply multiply the figure in the right hand column by five to give you a starting bank.

For example, you have a strategy which is successful 35% of the time. You should expect to see a losing run of 16 bets at some point. For 16 bets to make a 20% hole in your bank, your bank would be 16 x 5 = 80 points.

Laying: As with backing, I would advise against laying long-shots. A betting bank of 100 points would be my absolute minimum, and 200 points will give you psychological benefits such as peace of mind.

Trading: Trading has a much lower risk associated with it, and therefore you can operate accordingly with a smaller bank. A 10 point bank would be a sensible place to start. When trading, as a rule you should look to risk the same amount each time, whether backing first then laying off, or vice versa. To begin with you should avoid risking more than 10% of your funds.

If you follow the guidelines above you should never find yourself in the position of going bankrupt should your next bet fail. If you find your betting bank has dipped by more than 20% then red warning lights should begin flashing in your head. It is likely your strategy does not work, or at least needs re-thinking.

We spend a whole lesson exploring money management and the psychology of losing runs in Betting Success Formula.

As ever, I hope you find this article useful. I enjoy my betting, and I manage to make slow and steady headway when it comes to profit. But I do not profess to know everything, and I would be grateful if you have anything you would like to add (or indeed disagree with) by way of a comment that other readers may find valuable.

Tagged as: Betting Tutorials, Discipline