More businesses go bust due to cash-flow problems than profitability. It could also be said that more punters are long-term losers not because they can’t pick a winner, but because they have a very haphazard approach to staking. For most punters the size of their bet is determined by gut feel rather than any objective method.
But if you are going to have any serious success as a horse racing punter you need a proven money management plan to believe in and to stick to at all times.
Staking plans have been around as long as betting itself and there are many different approaches, each with their advantages and disadvantages. While some are promoted as being the punter’s saviour, you can’t reasonably expect a staking plan to magically resurrect selections that don’t show a profit in their own right.
Level stakes (betting the same amount every race) may be the simplest of all staking plans, but it is inherently flawed. Outlaying the same amount on every bet you have will make you over-reliant on big priced winners and cause larger than normal draw downs on your betting bank.
Consider the following scenario: a punter takes $200 to the track and bets $25 a race on whichever horse he fancies. Whether a horse is at $2 or $10 doesn’t matter to him, he just bets $25 the win each time.
Well the problem is this punter is outlaying the exact same amount on a horse that the market suggests has a 50% chance of winning the race as he is on a horse the market rates a 10% chance. Does that sound like a smart approach to you? One horse is five times as likely to win, yet the amount staked is the same. This approach makes little mathematical or punting sense yet is used by many.
Level stakes does not reward the punter well enough for backing shorter priced winners, instead your profitability is made or broken by the results of your longer priced bets. This leads to substantial fluctuations in your betting bank, especially when compared to a proportionate approach where you outlay more on the likely winners and less on the likely losers.
Level stakes punters also become victims of an ongoing market miscalculation that we have written about many times. The favourite/long shot bias has been proven over many years and across many markets and in simple terms it means that outsiders should be at a bigger price than they actually are, and favourites should be shorter. So flat betting all of your selections short-changes you in that way as well.
While level staking is for losers, an even more dangerous approach is progressive staking.
Progressive staking plans involve increasing your bet size following a loser or series of losers. This approach is almost always too aggressive and goes against the laws of probability, since previous unrelated results have no material effect on the next result. Yet you are increasing your bet size and risk, which is a recipe for disaster.
Remember the old probability question – if you have tossed 20 straight heads what is the chance of the next toss also being a head? It’s 50% of course, no more and no less, so increasing your bets following a losing streak doesn’t make mathematical sense unless you have an unlimited betting bank. It’s a road to ruin and a fast one at that.
The term “progressive staking” sounds fairly professional and the concept appeals to many punters as a way of (supposedly) making marginally profitable methods very profitable.
But if the concept was called by a more appropriate term such as “aggressive loss chasing plans” then far fewer punters would be tempted.
Most punters already bet too much of their bank on each bet and this problem is exacerbated by progressive betting, especially when you factor in the role of winning strike-rates.
For example, say that your records show a 30% winning strike-rate and you’re quite active with 40 bets per week.
For all but 1 week of the year you are likely to have between 6 and 18 winners from your 40 bets.
68% of the time you will have between 9 and 15 winners per week.
But it’s also a cold hard mathematical fact that you are a 98% chance of encountering a losing streak of 14 or more at some stage throughout the year.
In fact you can expect 4 such losing streaks of 14 over a 12 month period.
And you’re an even money chance (50%) of having a losing streak of 19.
The stats above refer to a 30% winning strike-rate which is higher than most punters achieve. What kind of progressive plan can cope with those kinds of losing runs or worse?
A regressive staking plan, as the name suggests, is the opposite and involves reducing your bet size once profit targets have been reached. This is a more conservative approach and while protecting profits may sound attractive, the downside is hot streaks are not fully rewarded and relatively small bets on long-awaited winners can damage a punter’s psyche and betting bank.
Put another way, the main problem is that it means you are guaranteed to have your biggest bet on losers and smallest bet on the winners.
Level stakes is a straightforward approach where your bet size is unchanged regardless of winning or losing streaks, or the odds of your bet. But it’s mathematically flawed and I have never met a professional punter who simply flat bets.
The Kelly Criterion focuses on varying your bet size according to the amount of value you are getting on the bet. In a nutshell, your bet size is determined by the true odds of your horse winning and the more ‘overs’ you are getting the more you bet.
For example, if you have assessed a horse to be a $2 chance you will bet more on it if you can get $3 rather than $2.50. This method (or modified versions of it) is very popular amongst serious punters who generally use a Kelly fractional. Do a google search and you’ll find many articles detailing this approach.
While many will argue the merits or otherwise of various staking plans, there is one undisputed fact – the vast majority of punters bet too much relative to the size of their bank. Can your wallet or betting account survive backing 10 straight losers and still be in good order?
If not, you will be like so many other punters who are wiped out by the (unfortunately) inevitable losing streak.
Every punter should research each staking method in detail and before making a decision you should carefully consider:
- Winning percentage – based on your long-term record, not what you’d like to achieve in the future.
- Losing streak – what is your longest run of outs?
- Psychology – are you an aggressive risk-taker, or more conservative and risk- averse?
- ‘Gambler’s ruin’ – google it for more information on the downfall of many punters.
Many punters believe that a progressive staking plan is the magic ingredient to be successful. They are partially right because good money management principles are essential.
But to expect a progressive plan to be the secret to punting riches is very naive and mathematically flawed. Promoters play on this naivety to tout expensive loss-chasing plans that are doomed to fail – if your system/method/tipster can’t make a profit on its own you will eventually go broke.
If I ever meet a professional punter who bets level stakes, or uses a progressive staking plan I will let you know. It hasn’t happened yet.