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Do you have a Staking Plan??

In this interview on RSN - Radio & Sport conducted by Warren Huntly, Dean the Trial Spy from Horse Racing Professionals discusses the importance of staking plans, and the pros and cons of the various types of approaches.

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Staking Methods and Strategies

Transcript from interview on RSN – Racing and Sport

Warren Huntly: It’s time to try and talk a bit about staking with Dean the Trial Spy, because I think most of us can find a winner or two during the afternoon at the races, but a question of your staking can make a huge difference in terms of whether it’s a profitable selection or whether you end up saying gee I tipped a few winners and I really didn’t show any profit for it. Dean does join us to give a bit of an idea of how we can best stake our selections during the course of an afternoon. Good afternoon Dean.

Dean the Trial Spy: Good afternoon Warren, how are you going?

Warren Huntly: Very well, thank you. Probably a fair comment that most of the punters listening out there would probably go to the races during the course of an afternoon and no doubt they would find their fair share of winners or say, if they weren’t even having a bet, say I would have backed that or I would have backed that. But more importantly from a financial point of view that had got to be a positive to your ledger at the end of the day and your staking can quite often be crucial as far that goes.

Dean the Trial Spy: Absolutely. It’s often said that more businesses go bust because of cash-flow problems rather than profitability. The same applies with punters. More punters are long-term losers not because they can’t pick a winner, as you say, but because they have a very haphazard approach to staking. For many punters, the size of their bets is determined by gut feel or how they are going on the day, rather than any objective method.

If you’re going to have any serious success as a horse racing punter you need a proven staking plan to believe in and to stick to it at all times, and there are many different approaches, each with their advantages and disadvantages. One key point is that you can’t reasonably expect any staking plan to magically resurrect selections that don’t show a profit at level stakes.

Warren Huntly: When you talk about having a strategy and having a staking plan, from your point of view, if you approach a day at the races, does it vary day to day as to how you approach it? Or do you start with a specific plan yourself and a strategy yourself and a staking plan with your bank for the day?

Dean the Trial Spy: No, I’ve got quite a strict staking methodology that I utilise. Essentially, perhaps just to explain some of the alternatives first and then explain why I use my methodology.

A lot of people just use a level staking plan, where you’re betting the same amount every race, which is the simplest but mathematically flawed, because essentially your bet size is unchanged regardless of a winning or a losing streak or the odds of your bet. But anyone who flat bets is essentially outlaying the same amount on every bet and it means you will be over-reliant on big priced winners which just causes larger than normal drawdowns on your betting bank during losing runs. One key reason for this is the favourite/longshot bias, which I talked about at length with Nadia a couple of weeks ago.

If you consider a punter who might take $200 to the track, and bets $25 a race on whichever horse he fancies. If one horse is even money and another is 10 to 1 and you’re betting the same amount each time, you’re outlaying the same amount on a horse that’s got a chance 5 times more likely to win, yet you’re staking the same amount. That doesn’t make any mathematical or punting sense.

Alternatively, there are progressive staking plans, that some suggest, where the approach is essentially too aggressive and again goes against the laws of probability. People need to remember that probability has no memory and so previously unrelated results have no material effect on the next result. If you have one independent event, such as the result of your bet Randwick Race 5, that’s not influenced by another independent event, whether you won or lost at Flemington Race 3. So those staking methodologies that increase your bet size following losers don’t make any sense either and they’re guaranteed to end in tears. Essentially it’s just a question of when you're going to get wiped out.

Warren Huntly: You’ve talked about your methodology. Sorry I’ve interrupted there. Your other point there?

Dean the Trial Spy: No that’s fine, I just thought I would just cover the other quickly which was the regressive staking plan which involves reducing your bet size once profit targets have been reached. Which is something that others use. It’s a more conservative approach, and again the downside is that your hot streaks when you’re going well aren’t fully rewarded and relatively small bets can be placed on hard-found winners, which can also damage your psyche and your betting bank. You’re essentially guaranteed to have your biggest bets on losers and smallest bets on winners.

My suggestion is rather than looking at a level staking plan, to offset and smooth the inevitable ups and downs of flat betting, many professionals employ a proportionate staking approach. That basically involves, betting to return a certain dollar amount or a percentage of your bank per bet. What that allows is that each winner returns the same amount regardless of the starting price.

So, you might bet to return say $500 per winner on your rated price, which means that if you’re getting odds of $2.50 you outlay $200. If you’re getting odds of $5 you outlay $100, or if you’re getting odds of $10 you outlay $50.

To make it even simpler, if people don't do their own ratings, you can simply take the market price and apply that same methodology.

Warren Huntly: The system you’re outlining there too, strongly rewards someone if you're doing your own ratings and those ratings are accurate, and sometimes the market price underestimates your price. But if you're backing a horse as you said and that you rate as an even money chance, but the market has as a $3 chance then you'll be significantly rewarded for the work you've done in terms of your staking method and the fact that you've got the right selection.

Dean the Trial Spy: Absolutely, that's the key, in that example, if you rate $2 you would have $250 say or 2.5 units with a 100 unit betting bank on that runner. Normally it would return 5 units, but of course if you're getting a price of $3 that's a big overlay and suddenly you’re collecting 7.5 units, and that's where the opportunity lies. It's essentially a derivation of what’s been proven to be in most gambling scenarios the most effective strategy long term, and that’s the Kelly Criterion.

The Kelly criterion essentially focuses on varying your bet size according to the amount of value you are getting on the bet. So, with the Kelly criterion, your bet size is determined by the true odds of your horse winning, and the more ‘overs’ you are getting the more you bet. So, if you have assessed a horse to be a $2 chance you will bet more on it if you can get $3 rather than $2.50. This method or modified versions of it, they are also very popular amongst serious punters who generally use a Kelly fractional such as half Kelly, or a quarter Kelly or even an eighth Kelly because the Kelly criterion itself can be a quite aggressive and you’ve really got to ensure that your markets are correct. I certainly suggest people do a Google search and you can find many articles detailing this approach and Kelly calculators, it’s certainly worth looking in to. I suppose, the approach that I suggest is a very simple one that all everyday punters can use, because you're essentially ensuring that you return the same amount regardless of the price of your horse, and that balances the ups and downs essentially.

Warren Huntly: That makes sense, you mentioned that people can obviously Google punting methods and Kelly system, all those types of things and read up on them but essentially, trying to break it down to its simplest form; if you bet to return a certain amount, being a percentage of your bank or a fixed amount per bet, then whether you’re using the market price available or your rated price, if you have done the extra work to come up with your own price, and then put your stake on at that price available or the price that you've rated to return that amount, that's a good way to conserve your bank, prolong your days punting, and longer term reach a better success level.

Dean the Trial Spy: Yes, that's exactly right. A reasonably basic example. If you place six bets on a day and you back winners at $2.50 and $3.50 and losers at $4.00, $5.00, $10.00 and $10.00. Betting at level stakes with a $2.50 and $3.50 winner, that’s six bets, and that’s $6.00 of profit let’s say if you had a $1.00 on each so you’ve broken even. If you were betting to return say $100 per winner, you would have had $40 on the $2.50 chance and $28 on the $3.50 chance. Suddenly those two winners have actually returned a total of $200 and you’ve only outlaid $133 using that strategy so suddenly, from a break even day, you have actually made a profit of $67 or a 50% profit on turnover plus you have used a strategy that reduces your variance.

Warren Huntly: It's a great strategy, and it's a great thought. Keeping your mind clear at the races is sometimes not the easiest thing that punters can do, but if they discipline themselves and plan a day and bet according to that simple system that you’ve just outlined, which doesn’t take too much maths to be able to figure it out, it can certainly create some much improved returns.

Terrific work Dean, I look forward to hearing you discuss more things going forward with Nadia in the weeks to come.

Dean the Trial Spy: No worries, thanks so much Warren.

Warren Huntly: Pretty simple strategies about how to stake your day at the races, and hopefully as all punters like to do, end up with more money in your pocket.

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