The Essential Elements of Successful Betting

This article covers the three essential elements of successful betting:

· Selection systems

· Analysis of past results

· Staking strategies 

Understanding these three elements will not guarantee success.  However, not understanding them will almost guarantee failure, unless you are extremely lucky.   

The first thing that a would-be backer or layer of horses needs is a selection system.  Well, that is the first logical step, isn’t it? 

So, armed with a winning selection system, you begin placing random amounts on your system’s selections.  You then wonder why you lose money day after day.  ‘Oh well’, you say, ‘the horse was unlucky’, ‘it had an off day’, ‘it was ridden badly’, ‘the ground was unsuitable’ and ‘the horse prefers left-handed tracks’ etc.  We have all heard these excuses and we have even used one or two of them, haven’t we? 

Occasionally, you get lucky and have the odd win.  Sometimes, you have the odd good day or two.  But, in the long run, your losses exceed your winnings.

Given that you don’t keep any records of your betting activity, you have no idea whether you have a successful system or not.

So, is getting a system the first logical move?

In my opinion - certainly not!

To be a successful backer or layer of horses, three things are required:

1. A system to select horses.

2. A method to record and analyse your betting history.

3. A staking strategy.

Do not try and cut corners.  To be successful, all three are needed before you should venture forth into the world of betting.  Otherwise ...

Let’s cover the selection of horses first:

Selection System

Even a bad selection system, strangely enough, is better than no selection system at all.  Here’s why:

If you are a person who selects horses based upon its name or your lucky  number, the results, and thus winnings, will be totally random.  It will therefore be difficult to analyse past results in a meaningful way and it will also be difficult to improve the system’s strike rate and therefore profits.  More importantly, it will be difficult to stem losses because the reason for them will be totally random. 

If you use this type of ‘method’ to select horses, then good luck to you.  You may well need it.

If you use  a system, no matter how bad it is, and you stick to it religiously, you will be able to analyse your past results effectively.  You will then be in a position to identify which factors are the most important in determining whether or not you will win your future bets.

If your past results can be analysed, then those factors which are causing the system to win or lose can be identified.  As a result, you are in a position to modify your future betting strategy.  This can lead to an increase in your system’s strike rate and a corresponding increase in the profitability of your system.  

So where do you find a selection system?

Firstly, within yourself.  Most people who are drawn to horse racing have opinions on horses.  They have theories relating to the outcome of races.  If you are such a person, now is your chance to prove yourself.

If you don’t have your own system and can’t or don’t want to create one, then consider obtaining one from the internet.  Some you may have to purchase but others are absolutely free.

So, now you have a system.  That’s the first step dealt with!

Even at this stage, it would be foolhardy to place bets using your system.  You need to prove that your selected system works.  So, once you have selected a system, you should trial it for a period of at least one month.  A three month trial period would be better still.  During this period you should simply record the selections identified by your system, your intended stakes and the odds at the time that you would have placed your bets.  Following the race, you should record the results of the races and what your profit or loss would have been had you placed your bets.  Under no circumstances, should you place any bets during the trial period.  At this stage, it would be far better to have patience rather than an empty bank account!

Analysis of Past Results

As I stated earlier, even a bad selection system is better than no selection system at all.  The reason for this is that the results of even a bad system can be analysed and valid conclusions reached whereas it is pointless analysing the results of a totally random system since the results will also be totally random.

So, how do we go about analysing our past results?

Firstly, we record a few basic facts about each of the selections which your system selects.  I would suggest that at least the following are recorded:

· Name of selection
· Date and time of race
· Name of track
· Going
· Jockey
· Trainer
· Draw
· Weight
· Form
· Weather
· Type of race
· Number of horses in race
· Starting price
· Position in betting at start of race
· Stake
· Odds
· Result of race
· Finishing position of your selection
· Name of winning horse
· Winning jockey
· Winning trainer
· Weight of winner
· Form of winner
· Starting price of winner

You may also wish to record additional information since the above is only the bare minimum that should be recorded.  Some examples of additional information that you may wish to record are:-

· Whether or not the selection was wearing any form of head gear e.g. blinkers
· Whether the selection drifted in the betting market

I’m sure that you can identify additional data which you feel may be worth recording.

Having identified the data that you will record, you will then need a method to record it in such a way that it can be analysed as quickly and efficiently as possible.  Although this can obviously be achieved using pen and paper, it is probably not the most efficient method available since it is slow, time-consuming and prone to error.  The most effective method is to use a PC and a commercially-available spreadsheet application such as Excel or a commercially-available database application such as Access.  If you are unfamiliar with the use of PCs, spreadsheets and databases, it is strongly recommended that you become familiar since their use will pay huge dividends.

Once you have recorded the data, you may then begin to analyse your past results.  This will allow you to determine which of your bets are profitable and which are not.  Identifying your unprofitable bets will allow you to modify your future betting strategy and will help to eliminate potential future losses.  As a result, your betting activities will become more profitable. 

By way of an actual example, when I analysed my past results, I found that the profitability of my system was negative at three tracks in particular - Folkstone, Wolverhampton and Leicester.  The profitability at these tracks was not only

negative, the losses far exceed those of any other track.  As a result, I ceased placing bets on races run held at these tracks.  Consequently, the profitability of my system improved significantly.  I have yet to determine why my system is ineffective at these tracks but, because I was able to analyse my past results, I was able to identify the source of my losses and was thus able to take effective action. 

Even though I ceased betting on races at these tracks, I continued to monitor the  bets that I would have placed had I not ceased.  Over time, the profitability of betting at Wolverhampton began to improve significantly.  I therefore began placing bets again on races run there.  As a result, I am now enjoying profitable betting at Wolverhampton.  Sadly, the profitability at Folkstone and Leicester remains gloomy and I still don’t bet on races held there.  I do, however, continue to monitor the situation since I will then be in a position to  take advantage of any positive change.

One other thing that I noticed when I analysed my past betting activities.  My system was particularly effective at three tracks in particular; Lingfield, Southwell and Exeter.  Although I have yet to determine the reason why, I take full advantage of this fact and increase my stakes when betting on races held at these particular tracks.  Again, I have been able to significantly improve the profitability of my system.

The above illustrates three other points:

Firstly, it is worth collecting and analysing data relating to bets that you would otherwise have placed since it allows you to determine if the initial conclusions reached are the result of an anomaly or are a permanent feature.  In the above examples, Wolverhampton appears to have been an anomaly whereas Leicester and Folkstone appear to be permanent features.

Secondly, you can never have too much data.  It is always worth collecting and analysing more.  The more data you have, the more analysis you can perform and the more accurate the results of your analysis will be.  My advice to you is to collect as much data as you can and analyse it as frequently and in as many ways as possible.  Believe me, you’ll never know what you may discover or how useful your discoveries will be until you begin.

Thirdly, be aware that analysing small amounts of data can give rise to invalid conclusions and that the smaller the amount of data is, the more likely it is that the conclusions will be invalid.  Let us take a case in point i.e. that of Wolverhampton, Leicester and Folkstone.  The initial analysis revealed that placing bets on races held at these tracks was unprofitable.  Further data revealed that the initial conclusions reached for Leicester and Folkstone were correct but that the conclusion reached for Wolverhampton was incorrect.

Note that without this information, I would have continued losing money at both Leicester and Folkstone since I would have been blissfully unaware.  Sadly, my bank manager would have noticed!

So, now we have some past results and we have analysed them.  I hope that you can see how important analysing your past results is.

That’s the second step dealt with!

Strike Rate

Although calculating the strike rate of your system is, in fact, an activity which is very much a part of analysing your past betting activity, it is worthy of its own section.  You will see why in just a few moments. 

The strike rate as a stand-alone statistic is, in my opinion, overrated.  In fact, it can be very misleading.  However, its implications cannot be stressed enough.

For those of you who are unfamiliar with this term, its calculation and its implications, the following information may be useful:

To calculate the strike rate, perform the following:

Divide the number of bets that you have won, using your system, by the number of bets that you have placed, using your system.  Bets won or lost using other systems should be excluded.  For example, let us suppose that you have placed 100 bets using your system and that 20 of them have won.  Your strike rate is therefore 20/100 = 0.2.  Strike rates, by convention, are expressed in percentage terms.  We therefore need to multiply by 100.  This gives a strike rate of 20%.  This means that, on average, 20% of your bets win and 80% lose.

So how does this help us?

Firstly, from the strike rate, we can calculate, statistically, how likely it is that we will encounter a losing sequence and how many consecutive losers the sequence is likely to contain.  It is beyond the scope of this document to fully cover this subject.  However, here is an extract of a table which identifies losing sequences which, statistically, have a 50% chance of occurring:

% Strike Rate<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p>	No. Consecutive Losers<o:p></o:p>
10<o:p></o:p>	43<o:p></o:p>
20<o:p></o:p>	24<o:p></o:p>
30<o:p></o:p>	16<o:p></o:p>
40<o:p></o:p>	12<o:p></o:p>
50<o:p></o:p>	9<o:p></o:p>
60<o:p></o:p>	7<o:p></o:p>
70<o:p></o:p>	6<o:p></o:p>
80<o:p></o:p>	5<o:p></o:p>
90<o:p></o:p>	3<o:p></o:p>

Notice how the number of consecutive losers drops as the strike rate increases.  That’s why a high strike rate is important.  The higher the strike rate, the lower the number of consecutive losers should be.
 
Secondly, we can use the strike rate to calculate the average odds that we should seek to back or lay our selections at.

If you back horses to win, then perform the following calculations:

Divide the losing bet percentage by the winning bet bet percentage.  If we go back to the example above, then our losing bet percentage is 80% and our winning bet percentage is 20%.  We therefore divide 80 by 20.  This gives us 4.0.  We then add 5%.  This allows for the betting exchange’s commission.  If your betting exchange charges commission at a different rate, then use that percentage rate instead of 5%.  5% of 4.0 is 0.2.  Therefore, we must add 0.2 to 4.0.  This gives us 4.2.  We must now add 1.0 to convert from fractional to decimal odds.  This gives us 5.2.

This figure is important.  It is the average odds of your winning bets, above which your betting activities will show a profit, below which your betting activities will show a loss and at which your betting activities will break even.  It therefore determines the minimum average price of the selections that you should consider backing at.

To illustrate this point, let’s consider these 4 examples:

Example 1.

Name of Horse<o:p></o:p>	Odds (decimal)<o:p></o:p>	Stake <o:p></o:p>	Result of Bet<o:p></o:p>	Commission<o:p></o:p>	Profit/Loss<o:p></o:p>
Under the Moon<o:p></o:p>	5.0<o:p></o:p>	£2<o:p></o:p>	Lost<o:p></o:p>	-<o:p></o:p>	-£2<o:p></o:p>
Spot Off<o:p></o:p>	3.5<o:p></o:p>	£2<o:p></o:p>	Lost<o:p></o:p>	-<o:p></o:p>	-£2<o:p></o:p>
Over the Thumb<o:p></o:p>	7.2<o:p></o:p>	£2<o:p></o:p>	Won<o:p></o:p>	£0.62<o:p></o:p>	+£11.78<o:p></o:p>
Fred Bear<o:p></o:p>	3.6<o:p></o:p>	£2<o:p></o:p>	Won<o:p></o:p>	£0.26<o:p></o:p>	+£4.94<o:p></o:p>
Unhappy Bunny<o:p></o:p>	3.5<o:p></o:p>	£2<o:p></o:p>	Lost<o:p></o:p>	-<o:p></o:p>	-£2<o:p></o:p>
Overpaid<o:p></o:p>	3.2<o:p></o:p>	£2<o:p></o:p>	Lost<o:p></o:p>	-<o:p></o:p>	-£2<o:p></o:p>
Under Worked<o:p></o:p>	6.8<o:p></o:p>	£2<o:p></o:p>	Lost<o:p></o:p>	-<o:p></o:p>	-£2<o:p></o:p>
Piston Broke<o:p></o:p>	10.5<o:p></o:p>	£2<o:p></o:p>	Lost<o:p></o:p>	-<o:p></o:p>	-£2<o:p></o:p>
Strike Rate<o:p></o:p>	3.7<o:p></o:p>	£2<o:p></o:p>	Lost<o:p></o:p>	-<o:p></o:p>	-£2<o:p></o:p>
Live Heat<o:p></o:p>	2.8<o:p></o:p>	£2<o:p></o:p>	Lost<o:p></o:p>	-<o:p></o:p>	-£2<o:p></o:p>
Totals<o:p></o:p>	<o:p></o:p>	£20<o:p></o:p>	<o:p></o:p>	£0.88<o:p></o:p>	+£0.72<o:p></o:p>

In this example, there are 10 bets, of which 8 were losers and 2 were winners.  The strike rate is therefore 2/10 or 20%.  The minimum average odds of the winners therefore needs to be 80/20 + 5% + 1.0.  This equals 5.2.  The winners were Over the Thumb (odds 7.2) and Fred Bear (odds 3.6).  The combined odds were 7.2 + 3.6 = 10.8 and the average odds were 10.8/2 = 5.4.  5.4 is greater than 5.2 and therefore, in theory, we should make a profit from our betting activity.  From the above table, we find that we did make a profit of £0.72.

Example 2

In this example, there are 10 bets, of which 8 were losers and 2 were winners.  The strike rate is therefore 2/10 or 20%.  The minimum average odds of the winners therefore needs to be 80/20 + 5% + 1.0.  This equals 5.2.  The winners were Over the Thumb (odds 6.2) and Fred Bear (odds 3.6).  Their combined odds were 6.2 + 3.6 = 9.8 and their average odds were 9.8/2 = 4.9.  4.9 is less than 5.2 and therefore, in theory, we ought to make a loss on our betting activity.  From the above table, we find that we did make a loss of £1.18.

Example 3

In this example, there are 10 bets, of which 8 were losers and 2 were winners.  The strike rate is therefore 2/10 or 20%.  The minimum average odds of the winners therefore needs to be 80/20 + 1.0 + 5%.  This equals 5.2.  The winners were Over the Thumb (odds 6.3) and Fred Bear (odds 4.1).  Their combined odds were 6.3 + 4.1 = 10.4 and their average odds were 10.4/2 = 5.2.  5.2 is equal to 5.2 and therefore, in theory, we ought to break even on our betting activity.  From the above table, we find that we lost £0.04.  The 4p difference is due to conversion issues.

Example 4

In this example, there are 10 bets, of which 8 were losers and 2 were winners.  The strike rate is therefore 2/10 or 20%.  The minimum average odds of the winners therefore needs to be 80/20 + 5% + 1.0.  This equals 5.2.  The winners were Over the Thumb (odds 8.2) and Fred Bear (odds 4.6).  Their combined odds were 8.2 + 4.6 = 12.8 and their average odds were 12.8/2 = 6.4.  6.4 is greater than 5.2 and therefore, in theory, we ought to make a profit on our betting activity.  From the above table, we find that we made a loss of £15.64.  Why?  Because the stakes were totally random and, as I explained earlier, placing random amounts on  selections produces random results.  The minimum average odds calculation only holds true if stakes are consistent.

We have covered the situation from a backer’s point of view.  Now let us look at the situation from a layer’s point of view.

If you lay horses to lose, then perform the following calculation:

Divide the winning bet percentage by the losing bet bet percentage.  In the examples below our winning bet percentage is 80% and our losing bet percentage is 20%.  We therefore divide 80 by 20.  This gives us 4.0.  We then add 5%.  This allows for the betting exchange’s commission.  If your betting exchange charges commission at a different rate, then use that percentage rate instead of 5%.  5% of 4.0 is 0.2.  Therefore, we must add 0.2 to 4.0.  This gives us 4.2.  We must now add 1.0 to convert from fractional to decimal odds.  This gives us 5.2.

This figure is important.  It is the average odds of your losing bets, below which your betting activities will show a profit, above which your betting activities will show a loss and at which your betting activities will break even.  It therefore determines the maximum average price of the selections that you should consider laying at.

Staking Strategies

From the above examples, it can be seen how important a staking plan is since staking random amounts on selections gives rise to random results.  In fact, a good staking strategy can often make allowances for a poor selection system.  Now let us look at the various options that are available:

The Fixed Stakes Staking Plan

This staking plan is one of the most basic and easily understood of all the staking strategies.  It involves placing a fixed amount on each selection, regardless of the odds. 

If a selection is backed to win, the amount that would be lost if the selection were to lose is a fixed amount and is equal to the stake.  The amount that would be won if the selection were to win varies with the odds.  The greater the odds, the greater is the amount which is won.  For example, if the stake is £5 and the odds of the selection is 4.0, then if the selection wins, the profit would be £15 (5 x (4 - 1)).  If the stake is £5 and the odds of the selection is 7.0, then if the selection wins, the profit would be £30 (5 x (7 - 1)).  In both cases, if the selection lost, the original stake of £5 would be lost. 

If selections are being layed to lose, the amount that would be won if the selection were to lose is a fixed amount and is equal to the stake.  The amount that would be lost if the selection were to win varies with the odds.  The greater the odds, the greater is the amount which would be lost.  For example, if the stake is £5 and the odds of the selection is 4.0, then if the selection wins, the loss would be £15 (5 x (4 - 1)).  If the stake is £5 and the odds of the selection is 7.0, then if the selection wins, the loss would be £30 (5 x (7 - 1)).  In both cases, if the selection loses, £5 would be won.

This system has the advantage that it is quick and easy to use and does not involve any mathematics whatsoever.  It also has the advantage that the performance of several systems can be easily compared using this staking plan.  This allows for the best performing systems to be retained and the worst to be discarded.

Some followers of horse racing advocate that if a selection system cannot make a profit using a fixed staking strategy, then the system should be discared.

The Fixed Liability Staking Plan

This staking strategy involves placing a variable amount, depending on the odds, on each selection such that the liability remains fixed.

With this staking strategy, the liability is fixed whilst the win amount varies with the odds.  The lower the odds, the greater is the win amount. 

To determine the stake, set the liability to a fixed amount and then, for each selection, divide it by the odds of the selection minus 1.0. 

The best way to describe this system is by way of the following examples:

Let us suppose that a selection is to be layed to lose.  Suppose that the odds of the selection is 5.0 and that the liability is fixed at £20.  To determine the stake, subtract 1.0 from the odds and divide the result into £20.  The stake is: 20/(5.0 – 1.0) = 20/4 = 5.00.  In this case, a stake of £5 is required in order that the liability is fixed at £20.  Should the selection lose, £5 would be won.  Should the selection win, £20 would be lost. 

Let us suppose that a selection is to be layed to lose.  Suppose that the odds of the selection is 11.0 and that the liability is fixed at £20.  To determine the stake, subtract 1.0 from the odds and divide the result into £20.  The stake is: 20/(11.0 – 1.0) =  20/10 = 2.00.  In this case, a stake of £2 is required in order that the liability is fixed at £20.  Should the selection lose, £2 would be won.  Should the selection win, £20 would be lost.

Let us suppose that a selection is to be backed to win.  With a fixed liability staking strategy, the same amount is placed on each selection, regardless of the odds of the selection.  The amount that would be lost if the selection were to lose is a fixed amount and is equal to the stake.  The amount that would be won if the selection were to win varies with the odds.  The greater the odds, the greater is the amount which would be won. 

If selections are being layed to lose, the amount that would be won if the selection were to lose is a variable amount dependent on the odds.  The smaller the odds, the greater is the amount which would be won.  The amount that would be lost if the selection were to win is fixed and known.

The system has the advantage that the loss on each bet is fixed and known.  Therefore, the potential day’s losses can be quickly and easily determined by simply multiplying the number of intended bets by the fixed liability per bet.  The system is also useful when laying the longer-priced horses since the liability can be limited.

The main disadvantage of this system is that the stake must be calculated for each bet individually.  A calculator, spreadsheet or good mental arithmetic abilities is therefore required. 

The Aggressive Staking Strategy
 
This staking plan is not for the cautious or feint-hearted.  The risk element is high, but so are the returns.   

Note that with this type of staking plan, it is possible for the whole of your betting bank to be lost within a very short space of time.  It is for this reason that the plan is referred to as aggressive.
The plan is based on the Martingale principal and a variation of this strategy, which only has a 33% strike rate, has been used to back race favourites.

The principal involves maintaining a consistent stake until such time as bet is lost.  At this point, the stake on the next bet is increased in order to recover the losses incurred on the previous bets and to provide a profit.

In order to fully explain this staking plan, let us consider the following examples:

Firstly, let us consider the system from a layer’s point of view: 

Suppose that the aim is to obtain a profit of £2 from each winning bet.  For the moment, we will ignore the betting exchange’s commission on all winning bets. 

Suppose that a selection is layed to lose at odds of 5.0.  The stake, in order to win £2, must be set to £2.  The liability on the bet, should our selection win, is therefore £8 (2 x (5 - 1)).   

If our selection wins and the bet is lost, we would lose £8.  In addition, £2 must be won on the next bet.  The stake on the next bet therefore becomes: £8 (loss from the previous bet) + £2 (to be won on the next bet)  = £10. 

Suppose that the odds on the next selection is 6.0.  The stake, as previously calculated, must be set to £10.  The liability on the bet, should it lose, is therefore £50 (10 x (6 - 1).  If the selection, on which the lay bet is placed, wins and the bet is lost, we would lose £50.  In addition, £2 must be won on the next bet.  The stake on the next bet therefore becomes: £58 (the losses from the previous two bets) + £2 (to be won on the next bet)  = £60. 

Suppose that the odds of the next selection is 7.0.  The stake, in order to win £2 and recover the previous losses, must be set to £60.  The liability on the bet, should it lose, is therefore £360 (60 x (7 - 1)).  If the selection wins and the bet is lost, we would lose £360.  In addition, £2 must be won on the next bet.  The stake on the next bet therefore becomes: £428 (losses from the previous bets) + £2 to be won on the next bet)  = £430. 

At this point, it is advised that betting should cease, unless the betting bank is so large that the loss can be disregarded.  If this is the case, the above process must be continued until a selection loses and a bet is won.

When a winning bet is placed, a £2 profit (less commission) will be made.  At this point, the stake should be reduced, once again, to £2.
 
To use this system, a large betting bank is required in case a long run of losing bets is encountered.

A slightly less aggressive variant of the above is, following a loss, stake in such a manner that losses are recovered and the profit element disregarded.  If this method is used, the worse case scenario is as follows:

Suppose that, again, the aim is to obtain a profit of £2 from each winning bet.  For the moment, we will ignore the betting exchange’s commission on all winning bets. 

Suppose that a selection is layed to lose at odds of 5.0.  The stake, in order to win £2, must be set to £2.  The liability on the bet, should our selection win, is therefore £8 (2 x (5 - 1)).   

If our selection wins and the bet is lost, we would lose £8.  The stake on the next bet therefore becomes: £8 (loss from the previous bet). 

Suppose that the odds on the next selection is 6.0.  The stake, as previously calculated, must be set to £8.  The liability on the bet, should it lose, is therefore £40 (8 x (6 - 1).  If the selection, on which the lay bet is placed, wins and the bet is lost, we would lose £40.  The stake on the next bet therefore becomes: £48 (the losses from the previous two bets). 

Suppose that the odds of the next selection is 7.0.  The stake, in order to recover the previous losses, must be set to £48.  The liability on the bet, should it lose, is therefore £288 (48 x (7 - 1)).  If the selection wins and the bet is lost, we would lose £288.  The stake on the next bet therefore becomes: £344 (losses from the previous bets).

At this point, it is advised that betting should cease, unless the betting bank is so large that the loss can be disregarded.  If this is the case, the above process must be continued until a selection loses and a bet is won.

When a winning bet is placed, a £2 profit (less commission) will be made.  At this point, the stake should be reduced, once again, to £2.

The advantage of this variant is that, following three consecutive losses, £344 would be lost instead of the £430 loss using the more aggressive strategy.

Now, let us consider the system from a backer’s point of view:

Suppose that the aim is to obtain a profit of £5 per winning bet.  For the moment, we will ignore the betting exchange’s commission on all winning bets. 

Suppose that a selection is backed to win at odds of 7.0.  The stake, in order to win £5, must be set to £2 (the minimum bet on betting exchanges).  The liability on the bet, should our selection lose, is £2.  Should our selection win, we would win £12 (2 x (7 - 1)) and exceed our £5 target. 

If our bet loses and the bet lost, we would lose £2.  In addition, £5 must be won on the next bet.  The target win on the next bet therefore becomes: £2 (loss from the previous bet) + £5 (to be won on the next bet)  = £7. 

Suppose that the odds on the next selection is 3.0.  The stake is calculated by dividing the target profit (£7) by the odds minus 1.0 (3 -1).  The stake is therefore £7/2 = £3.50.  The liability on the bet, should our selection lose, is therefore £3.50.  If our selection wins, we would win 3.50 x (3.0 - 1.0) = £7 and our target would be met.  If our selection, on which the bet is placed, loses and the bet lost, we would lose £7.  In addition, £5 must be won on the next bet.  The stake on the next bet therefore becomes: £5.50 (the losses from the previous two bets) + £5 (to be won on the next bet)  = £10.50. 

Suppose that the odds on the next selection is 3.0.  The stake is calculated by dividing the target profit (£10.50) by the odds minus 1.0 (3 -1).  The stake is therefore £10.50/2 = £5.25.  The liability on the bet, should our selection lose, is therefore £5.25.  Should our selection win, we would win £5.25 x (3.0 - 1.0) = £10.50 and our target would be met.  If the selection, on which the bet is placed, loses and the bet lost, we would lose £5.25.  In addition, £5 must be won on the next bet.  The stake on the next bet therefore becomes: £5.50 (the losses from the previous two bets) + £5 (to be won on the next bet)  = £10.50.

At this point, it can be seen that the stakes, though still relatively small, are increasing rapidly.

When a winning bet is placed, a £5 profit (less commission) will be made.  At this point, the stake should be reduced, once again, to obtain a £5 profit.

The Fixed Percentage of Bank Staking Strategy

This staking plan involves placing a fixed percentage of the betting bank on each selection.  Typically, 1% of the betting bank is used.  Regardless of whether the previous bet wins or loses, the percentage remains fixed.

The fixed percentage can be applied to either the stake or to the liability of the bet.

If the current bet wins, the stake on the next bet is increased in line with the new betting bank balance.  If the current bet loses, the stake on the next bet is decreased, also in line with the new betting bank balance.

The main advantage of this system is that it maximises the number of bets which can be made from a given bank balance.  Another advantage of this system is that the size of the bets increases only in line with the increase in the betting bank balance.  Losses are therefore usually containable.  Likewise, as losses are sustained, the bet size is reduced in order to minimise the impact of future losses on the bank.

The main disadvantage of this system is that losses are recovered at a lesser rate than that at which they were incurred since, following a loss, the stakes are reduced.  Using this method, therefore, betting banks tend to depleted with time.

In order to nullify this disadvantage, a ‘ratchet’ mechanism can be employed.  This involves increasing the stake size only when the betting bank balance has exceeded its previous highest balance.  It also involves never reducing the bet size.  The ‘ratchet’ mechanism can be applied to either the fixed stake or fixed liability staking strategies.

By way of an illustration, consider the following examples:

Initial bank – £250.  Fixed percentage = 1%.  Fixed stakes.

Firstly, let us consider placing bets without the ratchet being applied:

Bet 1.

Opening Bank Balance = £250
Stake = £2.50 (1% of bank)
Odds = 4.0
Bet type = lay
Result = lose
Profit = -£7.50
Closing Bank Balance = £242.50

Bet 2.

Opening Bank Balance = £242.50
Stake = £2.43 (1% of new bank)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.43
Closing Bank Balance = £244.93

Bet 3.

Opening Bank Balance = £244.93
Stake = £2.45 (1% of new bank)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.45
Closing Bank Balance = £247.38

Bet 4.

Opening Bank Balance = £247.38
Stake = £2.47 (1% of new bank)
Odds = 4.5
Bet type = lay
Result = win
Profit = £2.47
Closing Bank Balance = £249.85

Bet 5.

Opening Bank Balance = £249.85
Stake = £2.50 (1% of new bank)
Odds = 3.8
Bet type = lay
Result = win
Profit = £2.50
Closing Bank Balance = £252.35

Bet 6.

Opening Bank Balance = £252.35
Stake = £2.52 (1% of new bank)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.52
Final Bank Balance = £254.87

Bet 7.

Opening Bank Balance = £254.87
Stake = £2.55 (1% of new bank)
Odds = 3.8
Bet type = lay
Result = win
Profit = £2.55
Final Bank Balance = £257.42

Bet 8.

Opening Bank Balance = £257.42
Stake = £2.57 (1% of new bank)
Odds = 3.9
Bet type = lay
Result = win
Profit = £2.57
Final Bank Balance = £259.99

Bet 9.

Opening Bank Balance = £259.99
Stake = £2.60 (1% of new bank)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.60
Final Bank Balance = £262.59

Bet 10.

Opening Bank Balance = £262.59
Stake = £2.63 (1% of new bank)
Odds = 3.25
Bet type = lay
Result = win
Profit = £2.63
Final Bank Balance = £265.22

Now let us consider what happens if the ratchet is applied.

Bet 1.

Opening Bank Balance = £250
Stake = £2.50 (1% of bank)
Odds = 4.0
Bet type = lay
Result = lose
Profit = -£7.50
Closing Bank Balance = £242.50

Bet 2.

Opening Bank Balance = £242.50
Stake = £2.50 (1% of bank at bet 1)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.50
Closing Bank Balance = £245.00

Bet 3.

Opening Bank Balance = £245.00
Stake = £2.50 (1% of bank at bet 1)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.50
Closing Bank Balance = £247.50

Bet 4.

Opening Bank Balance = £247.50
Stake = £2.50 (1% of bank at bet 1)
Odds = 4.5
Bet type = lay
Result = win
Profit = £2.50
Closing Bank Balance = £250.00

Bet 5.

Opening Bank Balance = £250.00
Stake = £2.50 (1% of new bank)
Odds = 3.8
Bet type = lay
Result = win
Profit = £2.50
Closing Bank Balance = £252.50

Bet 6.

Opening Bank Balance = £252.50
Stake = £2.53 (1% of new bank)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.53
Final Bank Balance = £255.03

Bet 7.

Opening Bank Balance = £255.03
Stake = £2.55 (1% of new bank)
Odds = 3.8
Bet type = lay
Result = win
Profit = £2.55
Final Bank Balance = £257.58

Bet 8.

Opening Bank Balance = £257.58
Stake = £2.58 (1% of new bank)
Odds = 3.9
Bet type = lay
Result = win
Profit = £2.58
Final Bank Balance = £260.16

Bet 9.

Opening Bank Balance = £260.16
Stake = £2.60 (1% of new bank)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.60
Final Bank Balance = £262.76

Bet 10.

Opening Bank Balance = £262.76
Stake = £2.63 (1% of new bank)
Odds = 3.25
Bet type = lay
Result = win
Profit = £2.63
Final Bank Balance = £265.39

We can see from the above that the profit is greater when the ratchet is applied.  This is because, following a loss, the stake was not reduced.  Over a larger number of bets, the difference can become quite significant, particularly when a losing period is followed by a winning period.

Staking Strategies

From the above examples, it can be seen how important a staking plan is since staking random amounts on selections gives rise to random results.  In fact, a good staking strategy can often make allowances for a poor selection system.  Now let us look at the various options that are available:

The Fixed Stakes Staking Plan

This staking plan is one of the most basic and easily understood of all the staking strategies.  It involves placing a fixed amount on each selection, regardless of the odds. 

If a selection is backed to win, the amount that would be lost if the selection were to lose is a fixed amount and is equal to the stake.  The amount that would be won if the selection were to win varies with the odds.  The greater the odds, the greater is the amount which is won.  For example, if the stake is £5 and the odds of the selection is 4.0, then if the selection wins, the profit would be £15 (5 x (4 - 1)).  If the stake is £5 and the odds of the selection is 7.0, then if the selection wins, the profit would be £30 (5 x (7 - 1)).  In both cases, if the selection lost, the original stake of £5 would be lost. 

If selections are being layed to lose, the amount that would be won if the selection were to lose is a fixed amount and is equal to the stake.  The amount that would be lost if the selection were to win varies with the odds.  The greater the odds, the greater is the amount which would be lost.  For example, if the stake is £5 and the odds of the selection is 4.0, then if the selection wins, the loss would be £15 (5 x (4 - 1)).  If the stake is £5 and the odds of the selection is 7.0, then if the selection wins, the loss would be £30 (5 x (7 - 1)).  In both cases, if the selection loses, £5 would be won.

This system has the advantage that it is quick and easy to use and does not involve any mathematics whatsoever.  It also has the advantage that the performance of several systems can be easily compared using this staking plan.  This allows for the best performing systems to be retained and the worst to be discarded.

Some followers of horse racing advocate that if a selection system cannot make a profit using a fixed staking strategy, then the system should be discared.

The Fixed Liability Staking Plan

This staking strategy involves placing a variable amount, depending on the odds, on each selection such that the liability remains fixed.

With this staking strategy, the liability is fixed whilst the win amount varies with the odds.  The lower the odds, the greater is the win amount. 

To determine the stake, set the liability to a fixed amount and then, for each selection, divide it by the odds of the selection minus 1.0. 

The best way to describe this system is by way of the following examples:

Let us suppose that a selection is to be layed to lose.  Suppose that the odds of the selection is 5.0 and that the liability is fixed at £20.  To determine the stake, subtract 1.0 from the odds and divide the result into £20.  The stake is: 20/(5.0 – 1.0) = 20/4 = 5.00.  In this case, a stake of £5 is required in order that the liability is fixed at £20.  Should the selection lose, £5 would be won.  Should the selection win, £20 would be lost. 

Let us suppose that a selection is to be layed to lose.  Suppose that the odds of the selection is 11.0 and that the liability is fixed at £20.  To determine the stake, subtract 1.0 from the odds and divide the result into £20.  The stake is: 20/(11.0 – 1.0) =  20/10 = 2.00.  In this case, a stake of £2 is required in order that the liability is fixed at £20.  Should the selection lose, £2 would be won.  Should the selection win, £20 would be lost.

Let us suppose that a selection is to be backed to win.  With a fixed liability staking strategy, the same amount is placed on each selection, regardless of the odds of the selection.  The amount that would be lost if the selection were to lose is a fixed amount and is equal to the stake.  The amount that would be won if the selection were to win varies with the odds.  The greater the odds, the greater is the amount which would be won. 

If selections are being layed to lose, the amount that would be won if the selection were to lose is a variable amount dependent on the odds.  The smaller the odds, the greater is the amount which would be won.  The amount that would be lost if the selection were to win is fixed and known.

The system has the advantage that the loss on each bet is fixed and known.  Therefore, the potential day’s losses can be quickly and easily determined by simply multiplying the number of intended bets by the fixed liability per bet.  The system is also useful when laying the longer-priced horses since the liability can be limited.

The main disadvantage of this system is that the stake must be calculated for each bet individually.  A calculator, spreadsheet or good mental arithmetic abilities is therefore required. 

The Aggressive Staking Strategy
 
This staking plan is not for the cautious or feint-hearted.  The risk element is high, but so are the returns.   

Note that with this type of staking plan, it is possible for the whole of your betting bank to be lost within a very short space of time.  It is for this reason that the plan is referred to as aggressive.
The plan is based on the Martingale principal and a variation of this strategy, which only has a 33% strike rate, has been used to back race favourites.

The principal involves maintaining a consistent stake until such time as bet is lost.  At this point, the stake on the next bet is increased in order to recover the losses incurred on the previous bets and to provide a profit.

In order to fully explain this staking plan, let us consider the following examples:

Firstly, let us consider the system from a layer’s point of view: 

Suppose that the aim is to obtain a profit of £2 from each winning bet.  For the moment, we will ignore the betting exchange’s commission on all winning bets. 

Suppose that a selection is layed to lose at odds of 5.0.  The stake, in order to win £2, must be set to £2.  The liability on the bet, should our selection win, is therefore £8 (2 x (5 - 1)).   

If our selection wins and the bet is lost, we would lose £8.  In addition, £2 must be won on the next bet.  The stake on the next bet therefore becomes: £8 (loss from the previous bet) + £2 (to be won on the next bet)  = £10. 

Suppose that the odds on the next selection is 6.0.  The stake, as previously calculated, must be set to £10.  The liability on the bet, should it lose, is therefore £50 (10 x (6 - 1).  If the selection, on which the lay bet is placed, wins and the bet is lost, we would lose £50.  In addition, £2 must be won on the next bet.  The stake on the next bet therefore becomes: £58 (the losses from the previous two bets) + £2 (to be won on the next bet)  = £60. 

Suppose that the odds of the next selection is 7.0.  The stake, in order to win £2 and recover the previous losses, must be set to £60.  The liability on the bet, should it lose, is therefore £360 (60 x (7 - 1)).  If the selection wins and the bet is lost, we would lose £360.  In addition, £2 must be won on the next bet.  The stake on the next bet therefore becomes: £428 (losses from the previous bets) + £2 to be won on the next bet)  = £430. 

At this point, it is advised that betting should cease, unless the betting bank is so large that the loss can be disregarded.  If this is the case, the above process must be continued until a selection loses and a bet is won.

When a winning bet is placed, a £2 profit (less commission) will be made.  At this point, the stake should be reduced, once again, to £2.
 
To use this system, a large betting bank is required in case a long run of losing bets is encountered.

A slightly less aggressive variant of the above is, following a loss, stake in such a manner that losses are recovered and the profit element disregarded.  If this method is used, the worse case scenario is as follows:

Suppose that, again, the aim is to obtain a profit of £2 from each winning bet.  For the moment, we will ignore the betting exchange’s commission on all winning bets. 

Suppose that a selection is layed to lose at odds of 5.0.  The stake, in order to win £2, must be set to £2.  The liability on the bet, should our selection win, is therefore £8 (2 x (5 - 1)).   

If our selection wins and the bet is lost, we would lose £8.  The stake on the next bet therefore becomes: £8 (loss from the previous bet). 

Suppose that the odds on the next selection is 6.0.  The stake, as previously calculated, must be set to £8.  The liability on the bet, should it lose, is therefore £40 (8 x (6 - 1).  If the selection, on which the lay bet is placed, wins and the bet is lost, we would lose £40.  The stake on the next bet therefore becomes: £48 (the losses from the previous two bets). 

Suppose that the odds of the next selection is 7.0.  The stake, in order to recover the previous losses, must be set to £48.  The liability on the bet, should it lose, is therefore £288 (48 x (7 - 1)).  If the selection wins and the bet is lost, we would lose £288.  The stake on the next bet therefore becomes: £344 (losses from the previous bets).

At this point, it is advised that betting should cease, unless the betting bank is so large that the loss can be disregarded.  If this is the case, the above process must be continued until a selection loses and a bet is won.

When a winning bet is placed, a £2 profit (less commission) will be made.  At this point, the stake should be reduced, once again, to £2.

The advantage of this variant is that, following three consecutive losses, £344 would be lost instead of the £430 loss using the more aggressive strategy.

Now, let us consider the system from a backer’s point of view:

Suppose that the aim is to obtain a profit of £5 per winning bet.  For the moment, we will ignore the betting exchange’s commission on all winning bets. 

Suppose that a selection is backed to win at odds of 7.0.  The stake, in order to win £5, must be set to £2 (the minimum bet on betting exchanges).  The liability on the bet, should our selection lose, is £2.  Should our selection win, we would win £12 (2 x (7 - 1)) and exceed our £5 target. 

If our bet loses and the bet lost, we would lose £2.  In addition, £5 must be won on the next bet.  The target win on the next bet therefore becomes: £2 (loss from the previous bet) + £5 (to be won on the next bet)  = £7. 

Suppose that the odds on the next selection is 3.0.  The stake is calculated by dividing the target profit (£7) by the odds minus 1.0 (3 -1).  The stake is therefore £7/2 = £3.50.  The liability on the bet, should our selection lose, is therefore £3.50.  If our selection wins, we would win 3.50 x (3.0 - 1.0) = £7 and our target would be met.  If our selection, on which the bet is placed, loses and the bet lost, we would lose £7.  In addition, £5 must be won on the next bet.  The stake on the next bet therefore becomes: £5.50 (the losses from the previous two bets) + £5 (to be won on the next bet)  = £10.50. 

Suppose that the odds on the next selection is 3.0.  The stake is calculated by dividing the target profit (£10.50) by the odds minus 1.0 (3 -1).  The stake is therefore £10.50/2 = £5.25.  The liability on the bet, should our selection lose, is therefore £5.25.  Should our selection win, we would win £5.25 x (3.0 - 1.0) = £10.50 and our target would be met.  If the selection, on which the bet is placed, loses and the bet lost, we would lose £5.25.  In addition, £5 must be won on the next bet.  The stake on the next bet therefore becomes: £5.50 (the losses from the previous two bets) + £5 (to be won on the next bet)  = £10.50.

At this point, it can be seen that the stakes, though still relatively small, are increasing rapidly.

When a winning bet is placed, a £5 profit (less commission) will be made.  At this point, the stake should be reduced, once again, to obtain a £5 profit.

The Fixed Percentage of Bank Staking Strategy

This staking plan involves placing a fixed percentage of the betting bank on each selection.  Typically, 1% of the betting bank is used.  Regardless of whether the previous bet wins or loses, the percentage remains fixed.

The fixed percentage can be applied to either the stake or to the liability of the bet.

If the current bet wins, the stake on the next bet is increased in line with the new betting bank balance.  If the current bet loses, the stake on the next bet is decreased, also in line with the new betting bank balance.

The main advantage of this system is that it maximises the number of bets which can be made from a given bank balance.  Another advantage of this system is that the size of the bets increases only in line with the increase in the betting bank balance.  Losses are therefore usually containable.  Likewise, as losses are sustained, the bet size is reduced in order to minimise the impact of future losses on the bank.

The main disadvantage of this system is that losses are recovered at a lesser rate than that at which they were incurred since, following a loss, the stakes are reduced.  Using this method, therefore, betting banks tend to depleted with time.

In order to nullify this disadvantage, a ‘ratchet’ mechanism can be employed.  This involves increasing the stake size only when the betting bank balance has exceeded its previous highest balance.  It also involves never reducing the bet size.  The ‘ratchet’ mechanism can be applied to either the fixed stake or fixed liability staking strategies.

By way of an illustration, consider the following examples:

Initial bank – £250.  Fixed percentage = 1%.  Fixed stakes.

Firstly, let us consider placing bets without the ratchet being applied:

Bet 1.

Opening Bank Balance = £250
Stake = £2.50 (1% of bank)
Odds = 4.0
Bet type = lay
Result = lose
Profit = -£7.50
Closing Bank Balance = £242.50

Bet 2.

Opening Bank Balance = £242.50
Stake = £2.43 (1% of new bank)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.43
Closing Bank Balance = £244.93

Bet 3.

Opening Bank Balance = £244.93
Stake = £2.45 (1% of new bank)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.45
Closing Bank Balance = £247.38

Bet 4.

Opening Bank Balance = £247.38
Stake = £2.47 (1% of new bank)
Odds = 4.5
Bet type = lay
Result = win
Profit = £2.47
Closing Bank Balance = £249.85

Bet 5.

Opening Bank Balance = £249.85
Stake = £2.50 (1% of new bank)
Odds = 3.8
Bet type = lay
Result = win
Profit = £2.50
Closing Bank Balance = £252.35

Bet 6.

Opening Bank Balance = £252.35
Stake = £2.52 (1% of new bank)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.52
Final Bank Balance = £254.87

Bet 7.

Opening Bank Balance = £254.87
Stake = £2.55 (1% of new bank)
Odds = 3.8
Bet type = lay
Result = win
Profit = £2.55
Final Bank Balance = £257.42

Bet 8.

Opening Bank Balance = £257.42
Stake = £2.57 (1% of new bank)
Odds = 3.9
Bet type = lay
Result = win
Profit = £2.57
Final Bank Balance = £259.99

Bet 9.

Opening Bank Balance = £259.99
Stake = £2.60 (1% of new bank)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.60
Final Bank Balance = £262.59

Bet 10.

Opening Bank Balance = £262.59
Stake = £2.63 (1% of new bank)
Odds = 3.25
Bet type = lay
Result = win
Profit = £2.63
Final Bank Balance = £265.22

Now let us consider what happens if the ratchet is applied.

Bet 1.

Opening Bank Balance = £250
Stake = £2.50 (1% of bank)
Odds = 4.0
Bet type = lay
Result = lose
Profit = -£7.50
Closing Bank Balance = £242.50

Bet 2.

Opening Bank Balance = £242.50
Stake = £2.50 (1% of bank at bet 1)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.50
Closing Bank Balance = £245.00

Bet 3.

Opening Bank Balance = £245.00
Stake = £2.50 (1% of bank at bet 1)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.50
Closing Bank Balance = £247.50

Bet 4.

Opening Bank Balance = £247.50
Stake = £2.50 (1% of bank at bet 1)
Odds = 4.5
Bet type = lay
Result = win
Profit = £2.50
Closing Bank Balance = £250.00

Bet 5.

Opening Bank Balance = £250.00
Stake = £2.50 (1% of new bank)
Odds = 3.8
Bet type = lay
Result = win
Profit = £2.50
Closing Bank Balance = £252.50

Bet 6.

Opening Bank Balance = £252.50
Stake = £2.53 (1% of new bank)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.53
Final Bank Balance = £255.03

Bet 7.

Opening Bank Balance = £255.03
Stake = £2.55 (1% of new bank)
Odds = 3.8
Bet type = lay
Result = win
Profit = £2.55
Final Bank Balance = £257.58

Bet 8.

Opening Bank Balance = £257.58
Stake = £2.58 (1% of new bank)
Odds = 3.9
Bet type = lay
Result = win
Profit = £2.58
Final Bank Balance = £260.16

Bet 9.

Opening Bank Balance = £260.16
Stake = £2.60 (1% of new bank)
Odds = 3.5
Bet type = lay
Result = win
Profit = £2.60
Final Bank Balance = £262.76

Bet 10.

Opening Bank Balance = £262.76
Stake = £2.63 (1% of new bank)
Odds = 3.25
Bet type = lay
Result = win
Profit = £2.63
Final Bank Balance = £265.39

We can see from the above that the profit is greater when the ratchet is applied.  This is because, following a loss, the stake was not reduced.  Over a larger number of bets, the difference can become quite significant, particularly when a losing period is followed by a winning period.