Winning & Losing Cycles - What Can You Expect?

Understanding the nature of winning and losing cycles that can occur with your betting method is essential know-how for any successful punter. When things aren't going so well it's that wisdom you need to call on to rationalise to yourself that you're just experiencing a natural slump in results and things will soon turnaround.

Without that knowledge a losing run will naturally see you lose confidence in your selection method and either give up on it or adopt irrational and destructive betting behaviours that eventually wipe out your bankroll. It's possible that you have given up on profitable selection methods in the past because you interpreted a slump in results as a sign that the method doesn't work, when in fact that slump was within the normal expected range for a profitable betting method.

The statistical function of standard deviation  provides a handy way to measure the range of possible winners and therefore results you can expect for a given strike rate and number of bets.

For example, if you average a 35% strike rate, then in 200 bets you would expect 70 winners. The standard deviation for this set is calculated as the square root of: 200 (number of races) x 0.35 (win probability) x 0.65 (losing probability.) = 6.75 wins.

In a statistical sense, your actual number of winners will fall within one standard deviation 68% of the time (63.25 to 76.75 winners) and two standard deviations 95% of the time (56.5 to 83.5 winners.) For the sake of simplicity we will ignore the likelihood of results falling outside the 95% range.

If your average dividend is $3.14 providing a long-term profit of 9.9%, then natural variance in the number of winners could see your results fall anywhere within the following ranges:

*Assumes that the average winning dividend matches the long-term average

After 200 bets your profit will be somewhere between -0.6% and +20.6% most of the time, but you could be showing as much as -11.2% or +31.2%. That variation in results may shock you, but it's the reality of what you can actually experience in 200 bet cycle.

The larger the sample size the closer to the long-term average you can expect your results to be. For example, assuming the same 35% strike rate and $3.14 average dividend, after 5,000 bets you can expect somewhere between 6% and 14% profit, with the result falling between 8% and 12% profit most of the time. The reverse applies when dealing with smaller samples. In a 50 bet cycle you can expect anywhere between -32% and +52% profit.

The concept of standard deviation shows just how volatile and unpredictable punting outcomes can be.... and that's what makes the game so challenging. You should work out these details for your own betting method and that will help to put your past and future results in perspective. It's advisable to be conservative when estimating your average profit as this exercise shows just how large the sample needs to be before you can get an accurate long-term picture.

Having a profitable selection method is just one piece of the puzzle and in itself does not guarantee success. You must also have the knowledge of how far your results can deviate from that average in a given period and most importantly the capability to manage yourself through those periods.

Good punting.

Daniel