I’m really excited today because I’m going to show you something that I don’t think I have EVER seen blogged about anywhere else. But, it’s a stat that is crucial in deciding whether your going to start betting selections live or not!
It isn’t talked about because most people don’t know about it. Of those that do, the majority think it is too complicated to bother with. Now, just to reassure you, it isn’t complicated at all but it will take a few minutes to work out.
Would you rather spend a few minutes working out whether selections are ready to be bet live, with real money. Or lose your money because you don’t want to spend the few minutes it takes to investigate this stat?
You’re probably itching to know what this stat is. Drum roll please…
It is called… Probability Of Negative Return.
Okay so I know that it doesn’t sound very sexy. In fact it sounds a little boring. I tried to think of ways to spice the name up and… well I couldn’t think of any good ones!
But trust me when I say, boring as it’s name is, what it doesn’t sure isn’t boring. Particularly to your bankroll.
What this four word stat does is to tell you the chances of going bankrupt over these selections.
There is always some randomness in betting. You could get 10 losers in the row, 1 win and then another 20 losers. But, at the same time you could get 5 winners, 2 losers, 3 winners, 1 loser and then another 5 winners.
This stat is going to take all our results and ask the question… what if?
- What if the winners and losers didn’t come in this order?
It looks at every possible combination and then tells us the probability of making a loss over the course of these selections.
Pretty cool isn’t it.
You’re going to want to have at least 100 selections to make this valuable but as always with statistics, the more the better.
In order to calculate this statistics we need to perform the following calculations and I’m going to assume you’re doing this in excel so you can use the built in statistical functions as some get quite complicated if trying to do completely by hand.
1) Calculate the percentage profit on each bet
This means if the bet had odds of 4.25 and won, then your profit is 325%, if the bet lost then your profit is -100%.
Next we need to…
2) Take the average of the percentage profits
We get all the percentage profits for each bet together and work out the average of all these figures. You can use =average(selection of percentage profits).
3) We need to work out the standard error of the result from step 2
Don’t worry, this is very simple in Excel. You enter:
=stdev(all percentage profits)/sqrt(number of selections)
Obviously you’re going to need to replace “all percentage profits” with the cell range containing the percentage profit figures from step 1 and “number of selections” with the number of selections.
Then the final step is…
4) We calculate the normal distribution of these figures
Okay so I know that sounds complicated, but Excel allows it to be very simple for us to do. You type in:
=normdist(0;average of percentage profits;standard error;1)
You’re going to get a number between 0 and 1, and the closer to 0 that this is the better for you. These are probabilities. If the result is 0.40 then this means there is a 40% chance of having made a loss over these selections.
If you know that would you start betting on those selections live? I wouldn’t.
I like to see a 0.10 or 10% as a starting point. This I considered within my risk levels to consider start betting on the selections but normally I will continue to watch them a bit longer. If they continue to drop then I will start betting around 0.08 or 0.07 and will be happy to let the bankroll grow and make profits from that point.
If the selections drop below 0.05 then I will consider adding a significant amount into the bankroll for the selections.
I know that this takes a bit longer to perform than you may want to spend, but if you’re one of the people that is prepared to spend a bit longer in your preparation then you will vastly benefit in your bank account.
It would be great to hear your thoughts on this article below.