The Dangers of Variance

All punters who wish to be successful need to deal with variance. We look at what it is, how it works, and how to ensure it doesn't trip you up.

We speak to a lot of professional punters, and often ask them what their biggest challenge is.

Almost invariably their answer will involve variance, or an aspect of it.

Basically, variance represents the inconsistent manner in which returns from betting accumulate.

It’s not linear, like picking up a pay cheque every week.  Both winning and losing often occur in lumps.

Consider this: as a very basic example, a 40% strike-rate of wins to bets would appear to most to be a very healthy performance.  Over the long term – let’s say 1,000 bets – this would represent 400 wins.

It’s mathematically possible (if extremely, extremely unlikely) for those 400 wins to be the last 400 bets, meaning you could theoretically have an initial run of 600 losses.

There’s still 1,000 bets.  The strike rate is still a very healthy 40%.

It’s the most extreme possible example – so extreme that practically, it would never happen – but the fact that it’s mathematically possible illustrates the dangers of variance.

Losing runs happen to all punters.  Those who are unprepared and have a short-term focus bail out when they happen.  They’re always the punters with the worst results, as they don’t stick around for the winning runs to make their money back.

The most important tool in combating variance in undoubtedly a proper bankroll.

At Champion Bets, we religiously recommend a 100 unit bank for all of our betting packages.

Our Melbourne ratings analyst Trevor Lawson has often said that “you should never be embarrassed by how little you bet.”

You can’t survive 15 years as a professional punter if you’re over-staking. Every betting approach, including very successful ones, experience variance.

Yet all too often we see new members take on a Premium Package without the required bankroll to do so, only to have to bail out of their investment after losing as little as ten units.  They are in the minority, but it still happens more often than we’d like.

Not having a bank simply means you run out of funds at the first sign of minor variance, and invariably have to stop investing at the bottom of the cycle. Having lost money and by not continuing with a proven approach, they miss the inevitable upswing.

Like most things, it’s best illustrated with a simple example.

Trev’s Bets

After running the successful Melbourne Ratings service for around six months, last October we launched Trev’s Bets for those punters who don’t have the time to follow ratings all day.

Since then, the new service has produced a profit of 25 units at a PoT of over 6%, and we’re confident that will keep climbing.

But look at how that’s occurred.  This is the how the profit and loss position has progressed since the package started:

The lowest point is around halfway along.  At this point the package was down 34 units, so even somebody with a bank at that size would have been forced out.

We actually had a few members who cancelled the package well before then, after a matter of weeks (or even days!).  They clearly didn’t come prepared with anything close to a proper bankroll.

Those with the 100 unit bank however, still had 66 units on their side with which to continue trading.  What would have seemed a dire position for some would still be comfortably manageable for them.

From that time until now (less than two months), Trev’s Bets has made 59 units profit to now sit comfortably in the black.

That’s variance in action. Profit on turnover is 6% overall, yet both the losers and the winners have been relatively ‘bunched’.

Would you rather have blown up an under-capitalised bank of 30 or less units, or be up 25 units and still in the game backing winners?

We continue to see disappointing outcomes for people who don’t come prepared with a genuine 100 unit bank.

Our advice to new and old members alike is simple: have a dedicated dollar amount with which to invest and that is your genuine betting bank. Divide that total amount by 100 to determine your unit size, and stick with it. So a $10,000 bank means you’re betting $100 per unit, or a $2500 bank means $25 per unit.

Being disciplined and consistent about your betting bank is one of the most important things you can do to become a successful punter.

Next >>> What the professional punter needs

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1: What kind of punter are you? 

2: Mastering the Maths

3: Mastering the Maths Part 2