Staking is an often under-discussed element of betting, yet it can make or break you.
More often than not, it’s bad staking that causes bettors to lose their entire bankroll.
And here’s why…
Gamblers Ruin
Yes, it’s a pretty descriptive name!
But what the heck is it?
It’s when you’re betting with stakes larger than your bankroll can statistically sustain during a losing period.
Usually it happens because the bettor wants to make as much profit as quickly as possible, so they increase stakes rapidly when they’re winning. Then they start losing, but they don’t reduce their stakes and end up losing the entire bankroll.
Incredibly, the concept of Gamblers Ruin was invented in 1656 in a letter from Blaise Pascal to Pierre Fermet.
The big question is… how do we make sure it’s not going to affect you?
Before you do anything else we need to calculate the likely drawdown on your selections.
Notice how I said drawdowns and not losing streaks 😉
Losing streaks are of absolutely no use because they tell you how many selections in a row are likely to lose.
Yes… this may be nice information to know, but it’s not going to help with your staking, because what happens if we have the longest expected losing streak possible, one winner and then another longest expected losing streak possible, one winner and then a losing streak again.
It happens.
That’s why we have to calculate the drawdown, which is the biggest loss in selections.
And this blog post shows you exactly how you can do it in Excel or Google Sheets.
If you don’t have enough selections to calculate it, then here’s a nifty trick you can use to simulate it.
Type into a spreadsheet cell and then copy it down a few thousand rows:
=IF(RAND()<0.2,”1″,”-1)+0
What this will do is to fill each cell with either a -1 or a 1 and 20% of the time a 1 wil show up.
You can use this to simulate your selections, the above would assume a 20% strike rate. Changing the 0.2 to 0.3 would assume a 30% strike rate, and changing it to 0.15 would assume a 15% strike rate.
Once you’ve done this, take your average winning odds and calculate your profit from the winning bets assuming they all had the average winning odds of your selections.
Using this method you can generate thousands, or even hundreds of thousands, of “fake” bets which you can then use to calculate the longest downswing you can expect to have.
Next week I’ll look at the types of staking that you should use and the types that you shouldn’t.
