The highs and lows of gambling

top of the world

Most people start off gambling with small stakes to add a bit of enjoyment to sporting events.  As the adverts go, “sport’s more fun when you bet on it”.

Most people stick at that level and enjoy the high’s when they win and can deal with the lows as the amounts are not life changing.

The problem is there are a few people that take things to the next level.  Small bets turn to big bets.  Small losses turn to big losses.  The wins and almost wins push the urge for another bet.  Before they know it, they are betting more than they could ever afford.

I urge everyone to only bet within your limits, don’t hide your bets from family friends, and please watch this video (not made by me but sums everything up nicely).

Diversification – have eggs in multiple baskets

Eggs in one basket

What is diversification?

You’ve probably heard ‘putting all your eggs in one basket’.  Diversification is the opposite – ‘have your eggs spread across multiple baskets’.  You drop one basket and there are still plenty of baskets remaining.  To think of it in the financial world, you would not put your entire share portfolio into one stock/company.  If that company goes bankrupt you are left with nothing.  Similar you should not put all your money into one country or sector e.g. people made a fortune betting on tech companies, but when that bubble burst you were left with nothing.

The best way to make steady profits is have a diversified portfolio i.e. a mix of low risk, medium risk and high risk strategies that are all expected to be profitable long term.  When one strategy turns out not to be profitable, the losses will be absorbed by the other profitable strategies.

Would you put your entire betting bank on one bet? 

That should be an easy one.  The answer is ‘no’ in case anyone is still struggling.

Even if you are 99% sure it will win and the odd are amazing, there is still that 1% chance you will lose everything.  If you are comfortable with that sort of risk, then your risk tolerance levels are way higher than mine.  Sure, put a large chunk of money on it, just don’t bet the mortgage on it.

Should you use one profitable system only?

For some people the answer to this is yes.  They know a system is profitable (e.g. pre-race trading), and even though they may go through a few bad runs, overall they make money long term.

However, by having multiple profitable systems you will have steadier profits in the long term.  If one system has a bad run, the expectation is the losses will be offset by the other systems.  Obviously, the key here is that each system needs to be profitable in the long term.

Even a blind squirrel occasionally finds a nut

When I say you need some higher risk systems, they still need to make profit in the long term.  Just because a system occasionally finds a long odds winner, it doesn’t mean it is a good system to add to your portfolio.  To the previous point, only include systems that are profitable over the long term…..emphasis on the long term!

Should you only bet on one type of sport?

Having all your systems based on one type of sport may be fine if that is where your expertise is.  The key to making money from sports betting is by having an edge over the bookies and everyone else.  The best way to do that is to be an expert in a particular field i.e. have better knowledge than everyone else.  Being a jack of all trades is not going to help you be an expert on any given sport.

By betting on different sports, this will further diversify your portfolio but may not increase your overall profitability.  I would recommend focussing on one type of sport e.g. football or horse racing, but potentially having one or two systems from other sports.

Are your systems correlated?

To add some caution, ensure all your systems for any given sport are not heavily correlated.  By this I mean, if all your systems are based on similar criteria there is always a risk that as one system starts to fail all the systems start to fail. The more diversified you are across different sports, different markets, different strategies, the less correlated you will be.

When you talk about systems/strategies, what do you mean?

I do not mean the systems that marketers push in your direction and say are profitable.  As you will have no idea how these picks are made, you will have no idea how diversified you are.  Systems are betting methods or techniques that make money in the long term.  For example, a split may be:

  • Back to Lay trend bets (bet on odds early morning that you predict will shorten)
  • Pre-racing trading (scalping the markets based on short term moves)
  • In-play trading (automated dobbing)
  • Straight backing systems (some focussing on low odds, some on mid-range odds, and some on long shots).

How diversified should I be?

That is the million-dollar question that will depend on your risk tolerance level.  Due to time constraints I limit myself to the above 4 strategies (pre-race trading being the most time consuming).  The other best can be automated and set-up in the morning/evening, leaving me free to concentrate on scalping the markets during the day (when I’m not working!).

Psychology is the key to successful betting

Psychology is key

Psychology is the key to successful betting.  I’ll emphasis this again; Psychology is key.  You can have the best strategy or system in the world, but if your mindset is not there you’ll soon find yourself turning winning months into losing months and small losses into bank breaking losses.

There are numerous articles, and books on the subject.  As most people have no time to read a full book I’ve tried to summarise some of the important topics into one article.

Below are the basic psychological rules that everyone should follow.  I’ll state upfront, there will always be the occasional bet that slips through the net (we’ll call these emotional bets) but if you follow these rules for the majority of your betting then you should be fine in the long-run.

Avoid random bets

Sounds simple but it is usually the biggest mistake most punters make.  In simple terms, ‘always bet with a purpose’.  Key points to note:

  • Ensure the odds make sense. Don’t just bet because you think something will win, ensure the odds are greater than their chance of winning (e.g. the toss of a coin, you would want odds greater than evens to make long term profit).
  • Have a plan. Know your exit points from the start.  Work out a variety of scenarios prior to placing the bet.  This way, when the bet starts unfolding you will know whether you want to stay in or exit.
  • Backtest your sure fire system. You may think you have a great system.  If so, test it out over as long a period as possible to ensure it is profitable.  On the flip side, the history may not always repeat in the future and don’t try and fit a system where the filters do not make logical sense.
  • Patience is a virtue. Boredom is often a big downfall.  You end up placing bets for the sake of it.  Always be prepared to wait until the entry and exit points make sense.

In summary, be disciplined and ensure all your bets are done with discipline and purpose.  If you start betting randomly, chasing losses, etc then STOP. Get some fresh air, give yourself a talking to, make some notes on what went wrong and then start again fresh.  Everyone will make mistakes, those who profit long term are those who learn from them.

Be prepared to lose

  • No system or strategy will win 100% of the time, no matter what the marketers may say. Even the best system in the world will have some losing runs as there are so many random factors that cannot always be controlled.  Being able to keep a clear head when things go against you is one of the hardest things to do but also one of the most important.
  • Key points:
    1. Don’t chase bad money with good money.
    2. Don’t leverage up to recoup your losses.
    3. Don’t scrap a method/system unless you know it is no longer viable. Challenge all the assumptions in the system and see if there is anything that has changed.

Don’t get greedy

You may think you have found the ultimate system I.e. the goose that lays the golden egg.  It’s making you lots of money, so you decide to increase your stakes dramatically to make as much money as possible.  If you have found the ultimate flawless system, then congrats to you.  For 99% of people that system will eventually hit a bad run.  If you have increased your stakes too high you will suddenly find your whole bank has been wiped out (see the separate article on staking/bet sizes).

Confidence vs Fear

Fear results in losses.  Confidence equals success.  By pulling out of a winging bet early due to fear, you will be reducing your profits and increasing the bookies profits.  So back to the previous point, know your entry and exit points from the start.  Don’t let emotion override your thinking.  Being confident in your research and proven methods will result in higher profits in the long run.  To caveat, if your strategies are not proven then blind confidence will be a quick way to the poor house.

Time consuming

Don’t expect to jump straight in and make lots of money.  Being profitable long term is very time consuming.  Don’t expect to spend 5 minutes looking at form or previous results and expect to pick a winner.  To make money, you need to get an edge over the bookies.  To do this will take time and research.   This is the only way to find bets where there is value.

Most people will end up failing due to laziness.  As soon as people realise they can’t make a fortune after doing 30 mins of reading they give up.  If making money from betting is that easy, everyone would be doing it.  To join the 2% club (people who are profitable from betting) then you need to be prepared to put some serious time and effort in.

To emphasise a previous point; The biggest mistake people make is not learning from their mistakes.  Take notes, learn from it, and ensure you don’t make the same mistake twice.

Finding winning bets: Form, historical analysis and the present

3 legged stool technique

There are lots of views out there on how to come up with a successful betting strategy for finding winning bets.  Some common examples below:

  • Historical statistical analysis: analysing race or game data to come up with winning bets (e.g. betting horses ridden by a certain jockey at a certain course between certain odds = a profit of x over the past 5 years). This technique goes on the assumption that history will be repeated in the future.  A quick comment on that; just because a strategy appears to have been profitable for the past so many years or months, it does not mean that it necessary will occur again in the future.
  • Form analysis: analysing the form of the horse (course, jockey, form versus other horses etc) to determine its chance of winning.
  • The insider tip: this is everyone’s favourite. The trainer, owner, or someone’s mate gave some good advice so it must win.  The other one is, there is money piling in and the odds are dropping fast so someone must know someone.

So are any of these better than the other?

They all have their merits (2 and 3 more than 1), but my advice is you need to use a combination of all 3 (hence the 3 legged stool in the picture). What do I mean by that?

  1. Start off with form analysis: the more analysis you do in this area the smaller the number of selections you will have.
  2. Once you have looked at the form, then look at the historical stats for that course. What age horses do well, from what stall, does the favourite have a good win % etc. (if point 1 is done properly, this step can be skipped).
  3. Then look at any current information that you can find e.g. trainer opinions, odds movements etc.

Don’t forget the value!

Most important of all, ensure there is value in the odds.  Calculate (based on the above 3 points) what you think the % chance of the horse winning is.  Then convert it to odds and ensure the odds you get are higher than that.  For example, analysing all the historical course stats, the current form, and the markets moves may suggest that horse 1 is going to win.  If everything points to that, then everyone is probably going to have piled in and backed that horse.  If you get in late you are very unlikely to be getting any value from the bet i.e. you will be backing odds that are less than its true chance.

Sounds simple!  Obviously I’ve not given any details on how you complete points 1-3.  There are plenty of articles on the internet and more will come from me over time.  That should be a good point to get you started in finding winning bets.

No value = no bet


Let’s get this out the way early.  If you’re not betting for value you’re never going to make long term profits….which is what most people are after.  Keeping this in mind has really helped me turn my betting around.

In simple terms, if the chance of a horse winning is 50% you should only back the horse if the odds are greater than 2.0 (search the internet for converting %s to odds if you don’t understand this sentence).  Anything less than this, than you will lose money long term.

This is how casinos make money, they rely on people betting on odds that are less than the true odds.  If enough people bet like this, and do it often enough, the casino makes money and you lose money in the long term.  Sports betting is no different.  If you are constantly getting odds that are less than the actual chance of winning, you will lose long term.

Now the question you are probably thinking is; how do you find value bets?  Assuming efficient markets, the odds provided should reflect the actual chance of winning (plus a margin for the bookmaker).  In the financial markets, the markets are fairly efficient (unless you do some insider trading…illegal!), but in the sports betting markets there are lots of opportunities out there.  This is mainly due to the limitations in how bookmakers compile their odds.  Overall, to find value you need to be smarter than the bookmaker.  To be smarter you need to focus on an area where you feel you have extra knowledge (an edge) which bring the odds in your favour i.e. obtain odds better than the true odds and you will make money over the long term.

In summary, always keep in the back of mind when placing a bet….is there value in this bet or am I just betting on who I think will win.  By value betting, you will not win every time, but you should win over the long term.