The Wondrous Beauty of Compounding Part 2

My sincere apologies for taking so long to re- appear with Part 2 of this post. I’ve been battling manfully with what I was convinced was double pneumonia but Mrs MYBP assures me was man flu.  It was touch and go for a while but I’ve got through the worst of it and am returning to some kind of form.

As a result I haven’t felt like doing much of anything let alone turning my mind to the myriad mysteries of staking. I’ve mostly been a level stakes man throughout my betting career and make no claims to expert status in the field of leveraging your bank for greater profits – though as the title of this post indicates, I do recognise the incredible power of compounding.

That being said, I’ll give you my ideas. Part 1 drew some thought provoking comments from a number of readers and I’m hoping that this will do the same.

Having established that the percentage used in a percentage staking plan can have an enormous effect on profits made in the long term, how can we make an informed decision on the exact percentage to choose?

We need to strike the right balance between leveraging our profits and protecting the integrity of our bank.

My usual starting point when carrying out this kind of analysis would be to calculate the longest expected losing run over 1000 bets. There is a formula for calculating this (mail me if you’re interested) but I tend to use a table which makes life a lot easier. I’ve reproduced the table below (it’s accurate enough for our purposes)

Strike rate Percentage                                   Max Likely Losing Run Per 1000 bets

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

 

The important thing to remember here is that the larger the number of bets you look at, the longer the likely losing run will be. As an example with a 15% strike rate looked at over 1000 bets you are likely to hit a maximum losing run of 43 bets. However, if you were to have 10,000 bets with a similar strike rate, at some point you are likely to hit a losing run of 57 bets. That being the case, it’s useful to have a reasonable idea of the number of bets your selection method is going to throw up over a period of time. If you are looking at a method that throws up 300 bets a year then calculating your longest likely losing run over 1000 bets is ample. If you are looking at a method that throws up 10,000 bets a year, you need to dig a bit deeper than that.

Let’s assume the method we are analysing has 1000 bets a year with a strike rate of 60%. We can see from the table that we are likely to hit 8 consecutive losers at some point during year 1.

You can see that if we were to choose a 10% staking plan on such a method, we are almost certain to hit trouble and quite possibly decimate our bank at some point.

We therefore need our bank to be several times the size of our longest likely losing run – it is well within the realms of statistical possibility that we could get 2 such runs in quick succession!

For safety, I would say it is best to work with your bank broken down into a number of points that equates to 5 times your longest likely losing sequence.

Returning to the method I mentioned in Part 1 (that had a 60% strike rate) we are likely to hit a losing sequence of 8 bets in our first 1000 bets. Using the 5 times rule would give us a bank of 40 points and therefore a staking percentage (for our percentage staking plan) of 2.5%.

This would give us an anticipated maximum drawdown of 50% if were to hit a couple of consecutive maximum losing runs. Bearable for me – I’ve already indicated I would likely plump for 3% staking with this method – but probably a little on the savage side for a most people!

Conclusion – a safe percentage staking plan, for the majority of punters operating a 60% strike rate method, is 2%!

Long winded but we got there!

There are some interesting variations on the percentage staking plan which I will cover at some time in the future. These include adding a ratchet – as famously used by “Maria” to turn £3000 into £100,000 in under a year using a laying method with a strike rate of 85%. (I had hoped to include a link here to the famous EBA thread where she did it – but the thread seems to have disappeared!)

I’ll be back on Friday with more news.

Be lucky

Kieran

PS Somersby looks a bit big to me at 6/1 for the Victor Chandler on Saturday.  Looks nailed on for at least a place!

6 comments

  1. Yes its a shame that Maria Santonix’s famous thread on EBA has been junked.I would have expected them to keep it in perpetuity. Of course she defected to Adrian Masseys’s site and now runs her own forum – so that could be why its gone.
    As well as using % of bank and ratcheting, she is famous or her Lay staking plan – which is featured in several betting bots.
    Despite all of this there are still people who claim her results were falsified. Certainly her public backing and placing threads have been no where near as successful.

    Cheers,
    Ian

    1. Hi Ian

      Yes, it is a shame but whilst doing some trawling for it earlier I did notice a lot of doubters on some of the forums.

      It appears that some of the prices she claimed to be matched at have been proven to have never been available.

      Difficult to say – though it is hard to knock the validity of her staking approach.

      best,

      Kieran

  2. Hi Kieran,

    what a change to read about staking that is based upon probablity – and actually using maths!

    Staking is, in my opinion, a much neglected subject.

    I am convinced that more money is lost through bad staking than bad picking and many a good selection method has been cast aside because of, usually, suicidal staking plans.

    Just to illustrate, on a roulette wheel with 37 numbers there is a 2.7% built in advantage for the casino, (because they only pay 35/1 for a 36/1 shot). Yet your average casino manager would be disappointed not to make 10%!

    I think you have approached this from exactly the right angle: what does probability tell us to expect in terms of losing runs over this or that period? The table of expected losing runs per thousand bets is extremely useful and the 40% – 45% max losing runs tie in exactly with our experience with a 43% strike rate. Our longest ever losing run – over many more than one thousand I should add – is 13.

    Also, your point about allowing for more than one max losing run is good advice too. I don’t know if you read our tale of woe where we turned a £50 bank into nearly £1000 in just a few weeks only to lose the lot through not taking into account the fact that it is rarely one big losing run that wipes you out but a series of smaller ones, perhaps punctuated with the odd winner just to spin out the agony!

    I don’t know if you have read it, but there is an old book published in 1985 called the Punter’s Revenge. In it Tony Drapkin and Richard Forsyth test all this stuff to destruction. In one part they tested even money shots, (without the zero), in roulette over 50.000 spins from memory and the longest losing run was 17.

    Anyway, keep up the good work! I would like to review your two posts on this topic on our blog soon, with all due accreditations etc. of course.

    John

    1. Hi John

      Thanks for your comment.

      I find staking one of the hardest disciplines to master and over the years I have come to the conclusion that the only way to get it even half right is to only take into account the elements that can be accurately quantified – number of bets, strike rate, roi etc.

      Thanks again

      Kieran

  3. Kieran

    Another well written and thought provoking post, compounding as anyone who read the post about me previously has helped my portfolio achieve tremendous growth

    Yes there can be high risk and when I started I was prepared to lose my bank fortunately I didn’t, since then dynamic staking on high return and high strike rate services has paid dividends and I think part one of this is something that I will certainly be looking to trial should I get an opportunity

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