Tuesday, January 29, 2008

Handicapping: Losing Streaks

If you ask anyone, even professionals who win at this game, they will tell you it is difficult. I personally think it is the toughest of all gambling games. It is a high takeout game, with a low hit rate. We are not playing poker with a $50 bankroll on a 5 cent/ten cent table, where we can play many, many hands with small bet size losses. We are not playing football games where we should hit one of every two bets over time.

One of the toughest parts of the game to deal with and figure out are losing streaks. We are not going to talk about the psychology of losing streaks here, or how to last one with your bankroll still breathing (we’ll do that later though, as it is important). Instead we will start with a building block. We’ll look at a simple calculation to learn about why and how they happen and why knowing your hit rate is important.

How many people do this: You head to the track with a $100 voucher, bet 3 bets – say $15 to win and a few exotics each race – then lose it all. Off to the ATM to try again, swearing to ourselves that we are a worse handicapper than a dyslexic chimp. Relax, we aren’t. It is very easy to lose many races in a row. I’ll show you why.

First, people have said for years that you have to keep track of wagers. I know it is tough to do and that it can be a pain, especially when you are losing (I’ve been there and done that!), but they are right. This gives us one fundamental to becoming a better player.

If you know your hit rate you can calculate your losing streaks. It also helps you learn about what bankroll size you would need to break the string of losing. Losing streaks kill us if we don’t play with proper bet size and bankroll size.

For simplicity, let’s say you bet every favorite – you are a chalk player. You have a 35% hit rate, or 35 in 100 bets are cashes. To calculate what would be a reasonable expectation for a losing streak (i.e. a normal occurrence) you do this with a handheld calculator:

So for a chalk player his potential losing streak is:

which equals 12.3.

That means by betting favorites only, you will have a 12 race losing streak in a normal distribution. Betting $20 a race with a $200 voucher? It is normal for you to be broke some nights after race 10. It is not difficult at all to be a very good handicapper and lose many races in a row.

My hit rate is 23% over a large sample. My normal losing streak is 21 races.

Like I mentioned, there is much more to this puzzle to make us better players, namely: Bet sizing, payout rates, frequency of bets and more. We’ll look at others later. But when you go to the track with $100 to spend, remember one thing: Unless you are betting $2 to win a race with incredible discipline, you can find yourself broke, through very little fault of your own.

This formula was relayed to me from another player on the web. Although I have not checked the math, I think it works perfectly. Dick Mitchell was apparently the first person to use it. Several of Dick’s books are out of print now, but I scan for them from time to time.

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