Don't Be Confounded By Compounding! To help explain this scenario at play, let me take a classic example as first published in the latest SBC magazine (
Issue 94) and our review of a very promising tipping service.
On the outside looking in, this tipster has a very profitable record, having made
164.5% bank growth over the past 12 months (effectively doubling your money) from 611 proofed bets to their advised betting bank.
They have a highly unique approach as they focus at the front-end of the betting market and short-priced tips. By doing so they achieve a
very high strike rate of 81.7% so more than 4 out of 5 bets go on to win.
With such a high strike-rate, this opens up the potential of what is often termed 'compound staking' or 'compounding'.
Compounding is a popular and easy staking method where you simply risk 10% of your betting bank on each and every bet. The logic is simple - as your bank grows, so should your staking and your profits. Any losers you get (roughly 1 in 5 given the strike-rate in this instance) will be easily swallowed up.
It is often touted as a great way of making big strides from your betting - sometimes far in advance of level staking.
Well that is the theory at least. Yet the practical reality is not always that simple as the stats as taken from our review will help to reveal.
A Profit Of £4733 & A Loss Of £3472 Let's consider you have followed this tipster since it began on the 24th September, investing £1000 initially via a 10% compounding staking method.
After a great run from the first 400 bets, you have turned this initial £1000 into £5773.34 -
a profit of £4,773.34 as of the 19th April 2015.
But then disaster strikes...the service then starts to hit a losing run and before you know it - what was £5,733.34 has been reduced to £2,301.01!!
Still a fine profit on your initial £1000 starting point but what a rough run -
losing £3472 in the space of just a few months. My experience tells me that in this scenario most punters would not cope unless they were fully prepared for this loss and were running this compounding bank as a high risk option.
Most would walk away, throw in the towel and give up. Battle lost.
Sensible Level Stakes Punting - Less Glamorous But More Steady The far more sensible and mild-mannered approach is to simply place the same level stakes bet and grow your bank more organically. Basically putting the same amount on each bet as per the level staking plan.
So whilst you won't get the highs of a potential huge profit (at great risk)
you would actually have made more money this way as the table below reveals. Why Detailed Tipster Analysis Is Vital This is just one brief example of why looking at a tipster from all angles and not simply the profits on show is so critical.
In fact, you need to look at the worst case scenarios to ensure you are fully prepared for what we may come in the future.
As a punter you also need to be realistic with your staking. The old financial investing mantra applies to betting just as it does to stocks and shares or house buying.
High rewards come at high risks! If the service features above interests you or our analysis on compounding then do check out the full review in SBC 94.
Although we do not recommend the 10% compounding bank some others do, we recommend a different approach that might well heighten your profits but significantly reduce the risks.
Equally if you are after more advice on winning the psychological betting battle, you might be interested in our special report
'How To Adopt The Mindset Of A Pro-Gambler' which is available to all SBC members.
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