When we are looking at the selections we are betting, we often want to tweak them to try and make them generate a greater profit. In fact I don’t actually recommend doing this, but it is a completely natural reaction. After all, the reason we bet is to make a profit, and obviously we want this to be as big as possible. I will explain why you are usually better not doing this in another article, today I want to look at what most punters focus on, and why it is a mistake!
What is the first thing that most punters look at when they are testing tips or betting systems, or designing their own?
Profit. That make perfect sense, but what is wrong is how most people measure profit.
The most common way of measuring the performance of selections is through ROI (Return On Investment). The ROI tells us how much profit we should be making, without allowing the confusion of points getting in the way.
For example, if you have a 25% ROI then you will be expecting to make a profit of 25% of everything that you bet. If you bet £100 then you can expect to make £25 profit, if you bet £10,000 then you can expect to make £2,500.
It is a great measurement because it allows you to work out how much you can expect to profit based on your own stake sizes.
If your first thought is that we want to maximise the ROI then that makes perfect sense. Obviously if we can make a 40% ROI instead of 25% then that would be excellent. For every £100 in bets we are going to make £40 profit instead of £25 profit. At first glance it seems that all we should be focusing on is increasing the ROI.
But, ask yourself what the cost is?
There is always a cost to everything we do. If you change one thing, then somewhere else something else will also change to compensate. In betting, when managing to increase the ROI of your selections, the most common compensation is a decrease in the quantity of the selections.
A significant increase in ROI will usually see a significant decrease in the number of selections, which means that we are going to be placing a lot less bets.
And, this is not always a good thing!
It is not always good because, although the ROI is higher our profit is being affected because we are placing less money over a period of time due to the lower number of selections, otherwise known as turnover.
The best way to explain this is with an example.
Using our original example, we started with a 25% ROI. If we were getting 100 selections per month using this method and betting £1 on each selection then we are betting £100 per month (this is our turnover). Each month we are making a profit of £25 because our ROI is 25%.
We decide that we want to try and get a bigger ROI and change the selections until we are getting a 40% ROI, but this has cost us half of our selections. Now we are only betting on 50 selections per month at £1 per selection. Our turnover is now £50 and our profit is £20.
What just happened! We increased our ROI but our profit dropped by £5.
That is because the cost of increasing the ROI reduced the number of selections to a point where we are making less profit over the month even though the ROI is higher!
As you can see, you need to get the balance of turnover and ROI right. You will find your own level of comfort, personally I like to have a much higher turnover and lower ROI. Most people prefer to go somewhere in the middle.
What is important, is that you make sure you check that you are actually going to be making more profit next time you manage to find a way to increase your ROI.