A couple of weeks ago I wrote this post about what you should expect in your betting downswing. At the end of that post I promised I would write about a technique you can use to make sure that you’re still doing the right thing even when you’re in a downswing.
And that’s what I want to write about today. It doesn’t matter how confident you are in your strategies, there will always come a time when your downswing has been going on long enough to give you reason to doubt.
In these times it’s important to have some tricks up our sleeves to be able to give us the confidence we need to keep pushing through them until we come out the other side.
There are two approaches that I want to share with you. You can use either one of them, but personally I prefer to use both.
Usually at least one of my portfolios is in the middle of a downswing, currently there is just one and that has been going on for a month so far. This gives me the perfect example to use.
For both of these approaches I am assuming that you have been keeping proper records of your selections, the odds you took and the SP odds.
METHOD NUMBER ONE – Beating SP
This approach involves making sure that the odds you are taking on your selections are still, generally speaking, beating the SP odds.
Look at this sequence of twelve losing bets that I had in this portfolio in a single recent day:
What we’re interested in is the difference between the Odds Taken and the SP. Out of these twelve bets i got better odds in eight of them than the horse went off at. One of them the horse odds didn’t change and in three of them the SP odds were higher than what I took.
That means that even though this was a bad losing streak I was still placing bets on horses at odds higher than what they went off at.
In other words I was still beating the market on 67% of the selections. And that means…
…we will still make long-term profits.
It’s well known, and I’m sure you’ve heard before, that the SP Odds are a very accurate estimate of a horse’s chance of winning the race.
If you take the SP odds of 10,000 runners and convert them into the horse’s chance of winning you will find that horses who have odds of 4/1 (20% chance of winning) win 20% of the time. And that stays true across all the odds ranges.
By regularly beating the market on your selections, even if it’s been a few bets since you got a winner, you will still make long-term profits because your getting better odds than you should do.
This is a very quick and simple process which can give you confidence that you still have an edge and are going to make long-term profits even if you’re in the middle of a big downswing.
Of course, I recommend doing this over all selections since your downswing began rather than just twelve selections.
METHOD NUMBER TWO – Calculating Your Edge
The second approach requires a little bit more mathematics but shows you the edge that you’ve got.
Let’s look at some stats since my downswing on this portfolio began:
Strike Rate: 20.65%
As you can see from above the stats don’t look great. It’s a high turnover approach but the figure that you should focus on immediately is the last one.
There is still an edge of over 57% on the market. That means that although I’m in the middle of a downswing that’s already gone on for a month and will probably go on longer, I’ve still got an edge on my bets of over 57%.
That’s a pretty good confidence booster that I’m doing the right thing 😉
The way that you work this out is pretty simple if you use Excel.
You need to work out your strike rate, which I hope you do anyway, and the average odds you’ve been taking.
To work out the average odds in Excel you should put in a cell:
Assuming that column A contains the odds of your selections.
To work out your edge the formula you need to enter into Excel is:
=product(Strike Rate,(Decimal Odds – 1))+product(1 – Strike Rate, –1)
I told you it was pretty simple.
Take my strike rate of 20.65% and the average odds of 7.96 and you get the formula:
=product(0.2065,(7.96 – 1))+product(1 – 0.2065, –1)
If you’ve got Excel, or any other spreadsheet, then enter this now and you should get out the result of 0.6437 or an edge of 64.37%.
You’ve probably noticed that I said I had an edge of 57.19% but this shows a much higher edge, and you’d be right.
The reason is that I place most of my bets on Betfair, which means we have to take into account the commission of 5% that comes off winning bets. In effect this reduces the odds by 5%. If you use Betfair then this sum would be:
=product(Strike Rate,((Decimal Odds – 1)*0.95))+product(1 – Strike Rate, –1)
=product(0.2065,(7.96 – 1)*0.95))+product(1 – 0.2065, –1)
And this will give you the result of 0.5719 or an edge of 57.19%.
These are two very quick and effective ways of giving yourself the confidence boost that you need during a downswing to keep doing what you’re doing and know that you’re doing the right thing.