Why a staking plan is so crucial

staking betting bank

More businesses go bust due to cash-flow problems than lack of profitability. It could also be said that more punters are long-term losers not because they can’t pick a winner, but because they have a very haphazard approach to staking. For most punters, the size of their bet is determined by gut feel rather than any objective method.

If you are going to have any success as a punter you need a proven money management plan to stick to at all times.

Staking plans have been around as long as betting itself and there are many different approaches, each with their advantages and disadvantages. While some are promoted as being the punter’s saviour, you can’t reasonably expect a staking plan to magically resurrect selections that don’t show a profit in their own right.

Let’s take a look at the basic types of staking plans.

Staking Plan: Level Staking

Level stakes is essentially betting the same amount every bet. It may be the simplest of all staking plans, but it is inherently flawed for horse racing punters. Outlaying the same amount on every bet you have will make you over-reliant on big priced winners and cause larger than normal drawdowns on your betting bank.

Consider the following scenario: a punter takes $200 to the track and bets $25 a race on whichever horse he fancies. Whether a horse is at $2 or $10 doesn’t matter to him, he just bets $25 the win each time.

The problem is this punter is outlaying the exact same amount on a horse that the market suggests has a 50% chance of winning the race, as he is on a horse the market rates a 10% chance. Does that sound like a smart approach to you? One horse is five times as likely to win, yet the amount staked is the same. This approach makes little mathematical or punting sense yet is used by many.

Level stakes does not reward the punter well enough for backing shorter priced winners. Your profitability is made or broken by the results of your longer priced bets. This leads to substantial fluctuations in your betting bank, especially when compared to a proportionate approach where you outlay more on the likely winners and less on the likely losers.

Level stakes punters also become victims of an ongoing market miscalculation that we have written about many times. The favourite / long shot bias has been proven over many years and across many markets. In simple terms it means that outsiders should be at a bigger price than they actually are, and favourites should be shorter. So flat betting all of your selections short-changes you in that way as well.

Staking Plan: Progressive Staking

While level staking is for losers, an even more dangerous approach is progressive staking.

Progressive staking plans involve increasing your bet size following a loser or series of losers. This approach is too aggressive and goes against the law of probability. This is because previous unrelated results have no material effect on the next result. Yet, you are increasing your bet size and risk, which is a recipe for disaster.

Remember the old probability question: if 20 straight heads came up, what is the chance of the next toss also being a head?

It’s 50% of course, no more and no less, so increasing your bets following a losing streak doesn’t make mathematical sense unless you have an unlimited betting bank and access to a betting operator that will accept huge bets. It’s a road to ruin – and a fast one at that.

The term “progressive staking” sounds fairly professional. The concept appeals to many punters as a way of (supposedly) making marginally profitable methods very profitable.

Far fewer punters would be tempted if the concept was called by a more appropriate term such as “aggressive loss-chasing plans”.

Most punters already bet too much of their bank on each bet. Progressive staking exacerbates this issue, especially when you factor in the role of winning strike-rates.

Staking Plan: Progressive Staking and Strike Rates

For example, say your records show a 30% winning strike-rate and you’re quite active with 40 bets per week.

For all but 1 week of the year you are likely to have between 6 and 18 winners from your 40 bets.

68% of the time you will have between 9 and 15 winners per week.

But it’s also a cold hard mathematical fact that you are a 98% chance of encountering a losing streak of 14 or more at some stage throughout the year.

In fact you can expect four such losing streaks of 14 over a twleve-month period.

And you’re an even money chance (50%) of having a losing streak of 19.

The stats above refer to a 30% winning strike-rate, which is higher than most punters achieve. What kind of progressive plan can cope with those kinds of losing runs or worse?

Staking Plan: Regressive Staking

A regressive staking plan, as the name suggests, is the opposite. It involves reducing your bet size once profit targets have been reached, and is a more conservative approach. While protecting profits may sound attractive, the downside is real. Your betting bank and psyche are damaged by hot streaks that aren’t fully rewarded. When coupled with relatively small bets on long-awaited winners, this can be completely deflating.

Put another way, the main problem is that it means you are guaranteed to have your biggest bet on losers and smallest bet on the winners.

Staking Plan: Kelly Staking

The Kelly Criterion focuses on varying your bet size according to the amount of value you are getting on the bet. In a nutshell, the more ‘overs’ you think you’re getting, the more you bet.

For example, 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) is very popular among serious punters who use a Kelly fractional.

While many will argue the merits or otherwise of various staking plans, there is one undisputed fact. The vast majority of punters bet too much relative to the size of their bank. Can your wallet or betting account survive backing ten straight losers and still be in good order? Losing streaks are (unfortunately) inevitable so don’t let them wipe you out.

Staking plan: Consider your own Staking

Every punter should research each staking method in detail and before making a decision you should carefully consider:

  1. Winning percentage – based on your long-term record, not what you’d like to achieve in the future.
  2. Losing streak – your longest run of outs and largest drawdowns.
  3. Psychology – are you an aggressive risk-taker, or more conservative and risk-averse?
  4. Gambler’s ruin – is the downfall of many punters.

Many punters believe that a progressive staking plan is the magic ingredient to be successful. They are partially right because good money management principles are essential.

It’s mathematically flawed and naive to expect a progressive plan to be the secret to punting riches. Promoters that tout expensive loss-chasing plans are doomed to fail, which play on this naivety. If your system / method / tipster can’t make a profit on its own, you will eventually go broke.

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