Today I want to talk about staking. I want to talk about how we can increase your profits. I want to talk about how we can decrease your risk.
This can be done whether or not:
- You’ve never considered using a staking plan before
- You have a low volume or high volume of bets
- Your strike rate is big or small
In this step-by-step case study, I’m going to show you exactly how you can do it.
STEP #1: Identify If You Are Long Term Profitable
Before we start getting into how we are going to stake, we need to determine whether we are going to be long-term profitable or not.
No staking plan will work if we are not long-term profitable.
But since we don’t want to wait in the long-term before we start maximising our bankroll growth and profits, we need to use a couple of statistics to help us do this.
The most important one is known as the A/E ratio or PIV (Pool Impact Value).
This figure compares the number of winners we find in our selections against the number of winners the odds have predicted we’d have.
As long as we’re beating the market, we’ll be long-term profitable.
And luckily, the calculation is just as simple as the concept. It is…
Winners ÷ Expected Winners
The number of winners we’ve got from our selections is usually a number we have immediately to hand 😀 so I’ll jump to how to calculate expected winners.
Here are some selections of mine:
|05/04/2020 03:30||Countess Constance||20.43|
|05/04/2020 04:20||Jimmy Two Times||11.4|
|05/04/2020 15:40||Ebony N Ivory||6.37|
|05/04/2020 15:40||Dream Farr||3.78|
|05/04/2020 16:50||Farmer Boy||6.67|
|05/04/2020 18:20||Whos De Baby||4.8|
|07/04/2020 10:40||First Sargeant||9.92|
|07/04/2020 20:50||Satchville Flyer||11.51|
|07/04/2020 20:50||Chikoko Trail||5.05|
|09/04/2020 13:30||Late Night Lily||7.72|
|10/04/2020 00:30||Golden Horn||3.32|
|12/04/2020 15:00||Prancing Oscar||7.24|
|12/04/2020 17:00||One To Go||6.76|
|13/04/2020 12:40||La La Land||5.48|
|13/04/2020 12:00||Street Duel||3.51|
|13/04/2020 19:50||Green Zone||3.92|
|01/05/2020 08:00||Boomerang Bob||3.41|
|01/05/2020 09:30||Copper West||2.9|
|05/05/2020 07:30||Stringybark Creek||4.66|
In order to find the Expected Winners we need to take the number 1 and divide it by the odds for each horse.
Countess Constance would be 1 ÷ 20.43 = 0.05
What does this mean?
It means that this horse had a probability of winning of 0.05 or 5%, based purely on its odds.
We do that for every horse.
|05/04/2020 03:30||Countess Constance||20.43||0.049|
|05/04/2020 04:20||Jimmy Two Times||11.4||0.088|
|05/04/2020 15:40||Ebony N Ivory||6.37||0.157|
|05/04/2020 15:40||Dream Farr||3.78||0.265|
|05/04/2020 16:50||Farmer Boy||6.67||0.15|
|05/04/2020 18:20||Whos De Baby||4.8||0.208|
|07/04/2020 10:40||First Sargeant||9.92||0.101|
|07/04/2020 20:50||Satchville Flyer||11.51||0.087|
|07/04/2020 20:50||Chikoko Trail||5.05||0.198|
|09/04/2020 13:30||Late Night Lily||7.72||0.13|
|10/04/2020 00:30||Golden Horn||3.32||0.301|
|12/04/2020 15:00||Prancing Oscar||7.24||0.138|
|12/04/2020 17:00||One To Go||6.76||0.148|
|13/04/2020 12:40||La La Land||5.48||0.182|
|13/04/2020 12:00||Street Duel||3.51||0.285|
|13/04/2020 19:50||Green Zone||3.92||0.255|
|01/05/2020 08:00||Boomerang Bob||3.41||0.293|
|01/05/2020 09:30||Copper West||2.9||0.345|
|05/05/2020 07:30||Stringybark Creek||4.66||0.215|
Once you have the probability of winning for every horse, you add them all together.
In this case we get a total of 5.63 winners.
Which means… based purely on the odds we would have expected to get 5.63 winners from these selections.
That’s the Expected Winners.
How many winners did I actually get?
Remember the sum we needed to calculate to find out if we were going to have a long-term profit was the A/E ratio:
Winners ÷ Expected Winners
Which in this case is:
8 ÷ 5.63 = 1.42
As the result is greater than one, this tells us that these selections are winning more than the odds suggest. But we already knew that because we had eight winners and the expected winners were 5.63.
What it tells us is that it we have a 42% edge on these selections.
We take 1 away from the result and multiple it by 100 to get the percentage edge we have (assuming the result is greater than one).
If the number is less than one, then even when we have a profit we are not beating the odds and we can expect the profit to turn into losses the longer we bet unless we can beat the market and get this number greater than one.
In order to be able to successfully use a staking plan we need to have an A/E ratio of greater than one.
Remember that this is based on win bets, if you use a different bet type then you need to use those odds, e.g. place odds for place bets, win and place odds for each-way bets
So, to identify if you are long term profitable you need to:
- Count the number of winners in your selections
- Find the expected winners in your selections
- Calculate the A/E (PIV) ratio
- Make sure it is higher than 1.00
STEP #2: Staking Based On The Risk
There are lots of staking plans out there, and I will be looking at a lot of them in more detail, but most of them don’t take account of your risk when they determine the stake.
The majority of staking plans focus on whether you’ve won or lost the previous bets, and how much profit you’ve made.
They’re focusing on profit, and that means they’re focusing on the wrong thing!
Your staking plan shouldn’t be focused on building profits, and in this step I’m going to explain why…
Staking plans usually focus on profit because thats what bettors want.
Bettors are usually only interested in the profit they’re making. But, as you know, that’s the end result of the entire process. If, in the long-term, you have completed the process of finding selections successfully then you will have found a profit.
It’s a by-product of finding the right selections.
And your staking should be exactly the same.
There is one very quick way to make more profits if you have a long-term profitable strategy…
Place bigger bets.
The problem is you can’t place bigger bets without a bigger bankroll.
Which means… your primary focus should be on bankroll growth with minimal risk.
Whatever way you look at it, betting on a 20/1 shot holds more risk than betting on a 2/1 shot.
One has a 4.76% chance of winning and one has a 33.33% chance of winning.
I’m sure you’d agree that you’d prefer to stake more on the bet with a 33% chance of winning.
And there are two reasons that you should.
- The horse has a bigger chance of winning ?
- 33% chances will have shorter losing streaks
So we should only be staking based on the risk we are facing. Which means we are staking based on the odds of a bet.
How do we do this?
Simply by taking your edge and dividing it by (decimal odds – 1).
The result gives you the percentage of your bankroll you should stake on the bet.
STEP #3: Figuring Out What Your Edge Is
When I sat down to write this I was going to go through the calculation of figuring out your edge in detail. That calculation is:
(Odds x Probability Of Winning) – Probability Of Losing = EDGE
But then I thought… it’s impossible for most of us to know what our edge is on each bet. that we place.
Some of the big teams figure it out, and they place their bets based on the edge they have in the bet. You may have read of Bill Benter doing this in Hong Kong many years ago, and a lot of the larger international teams still do.
However, for you and me, we’re never going to have an accurate enough probability of a horse’s chance of winning to calculate our true edge on a bet-by-bet basis.
And if you have your edge even slightly out when using it to calculate your stakes, you’ll lose your bankroll faster than you can sneeze.
That leaves us with two options:
- We can set our edge based on what our A/E ratio is
- We determine a fixed edge and use that in all bets
Despite having seen posts saying you should use the A/E ratio, I don’t recommend that you do that.
This ratio tells you whether you have an edge, but it is not your edge on a bet-by-bet basis.
If you start putting in an 8% edge to figure out your stake, you’re going to be in for a wild and scary ride.
The A/E (PIV) ratio tells us whether we are beating the market, and this tells us if we are long-term profitable.
It does that very well, don’t try and make it do something it’s not supposed to.
Instead, I’d recommend setting a fixed edge for all your bets.
Personally I would choose from 0.25%, 0.50%, 1%, 1.5% or 2%.
The smaller the edge you choose, the more conservative your staking, the more protected your bankroll but the slower the bankroll will grow.
Usually 0.50% or 1% is going to suit most people.
Decide which suits you the best, and then move on to how you get the stakes for each bet.
STEP #4: How To Calculate Your Stakes
So far we have:
- Identified our strategy is long-term profitable
- Understood we are going to stake based on risk to maximise bankroll growth
- Decided what our edge is going to be
And now we’re going to calculate what our stake size will be for each bet.
To do that we take our edge, I’m going to use 1% for this example, and divide it by our odds.
Taking Countless Constance, from the table above, at odds of 20.43 this would give us:
1 ÷ 19.43 = 0.05%
We stake 0.05% of our bankroll on this bet.
Just to explain why I have put in 19.43 instead of 20.43… Using decimal odds, which I always do, we need to subtract one off of them before plugging them into the calculation. This is because in decimal odds there is a one added to the odds to represent your stake, and we need to remove this before calculating our stake. Taking the odds of 20.43 and subtracting one leaves us with 19.43.
Now we have the sum you can see above, and it tells us exactly how much we should be staking on each bet.
Using proportional staking isn’t sexy, and it’s not going to get you massive spikes in your bankroll when high odds winners come in.
But in exchange for that you will be reducing the volatility of your bets. Here’s an example of selections, the first using flat bet staking and the second using proportional staking.
As you can see the profit of the flat staking is higher, but that’s because we are staking much more overall.
With proportional staking we see a much smooth graph with smaller peaks and troughs, a more consistent performance and a gentler journey that will suit the majority of us.
As the bankroll grows so will our stakes, and therefore the profit. But with far easier losing streaks and downswings to manage. And managing those losing streaks and downswings is at least 50% of the battle.
The reason flat staking sees more volatility and bigger losing swings, is because we are effectively over-staking, or betting more than the bankroll can comfortably cope with.
Have you ever tried using proportional staking?
Let me know in the comments below.