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.