Money Management

[shoelessjoe]

Hi All, Im sure Im not the only one that has this problem but my money management really sucks.I feel this is just as important as being able to pick the right pacelines.If anyone has any suggestions on a good book other than the one by Barry Meadows I would like to know.If possible something that's geared to someone with a small bankroll.Someone did suggest Horse Racing Logic by Jones. Thanks Shoeless

[timtam]

Heres a progression you could try

5
8
10
12
14
16
18
19
20
21

with a hit you drop back to the beginning or back a few steps depending

how far down you are at the time

small bankroll with a decent win % you can play for a while and make
it worthwhile

[joeyspicks]

Shoeless: I would highly recommend "Horse Market Investing" by
by David E Schwartz. You can get for about $34 at horsestreet.com

[Overlay]

Along with the titles by Dave Schwartz and Barry Meadow already mentioned, I've also found Commonsense Betting by Dick Mitchell very useful.

[BIG RED]

All depends how much 'action' you want. I like to play 5 trks at a time when I want a lot of action. How I do it can be cheap also, that way, you yourself can see how you do.I bet much more, but, the progression would be:

Per track, I play only the 4 best bets of card. $2, $3, $5, then $10. That's a simple $20 per track to see how you do. Good luck

[BIG RED]

Forgot to say, you stop when you hit. Play only up to the 4 bets per track. A decent 30% win can make this work

Progression methods are doomed to hit the eventual long losing streak that wipes them out.

[Buckeye]

agree with Midnight.

Math is not debatable, "if you want to play a "system" (progression) we will send a car for you!" Plane train automobile, etc. It's been tried before, and it doesn't work, maybe Dave has something to say which could work, but essentially, there is no free lunch. It's been tried before and it always fails. Has something to do with Expectation.

[Dave Schwartz]

...maybe Dave has something to say which could work...

Okay, so maybe it is self-centered of me to consider this was me you are talking about, but "the heard my name" buzzer went off (and ruined a fine Wednesday nap, I might add) so here I am.

First, money management is not rocket science, but risk-reward can be.

Let's start with a couple of absolutes (no vodka):

1. You cannot change a negative expectancy to a positive expectancy with a betting scheme.

2. You cannot change a positive expectancy to a negative expectancy with a betting scheme.

So, what good is a betting strategy?

Well, if you already have a positive expectancy there is more to playing a game than winning and losing. There is also consistency.

While we cannot change a disadvantage into an advantage, we can use a money management strategy to restructure the bets in the game to something that is... for lack of a better phrase... more pleasant experience.

Permit me to site a couple of examples.

Suppose you are a casino owner. (Joe's Casino - take interstate 50 south to just this side of the tunnel, make a left next to the Shell station, then go...) In this casino, you have a roulette wheel. That wheel has 36 numbers (numbered, amazingly, 1 through 36), a zero and a double-zero. A total of 38 numbers.

When one of your suck... uh, players, makes a wager on a number they have one chance in 38 of connecting and you pay them 35-1. For you math whizzes out there, this translates into a 5.26% disadvantage for them. (bet $1 x 38 = $38 bet, return $36 [don't forget that you get your dollar back as well], so you lost 2/38 or -5.26%)

So, what is your advantage? Why it is 5.26%, of course. Because whatever the, uh, customer is going to lose, you are going to win.

Now, that may seem very basic, but one must always bear it in mind. For every winning bet, there is a losing bet as well.

So, imagine that the customers at your table are so tired of hitting only once out of each 38 bets and they begin to complain that the game is too hard. You decide to give them a special wager where they can win twice as often! You call it "Two Numbers Split" and decide that it is going to pay 17-1. Is the customer smart enough to see that your advantage (his disadvantage) has not changed in spite of hitting twice as often?

(bet = $1 x 38= $38; return $36 [$18 x 2; don't forget that you are getting your dollar back two times now], so he is still losing 2/38 or 5.26%.)

Heck, you might even develop a bet that allows the user to play three numbers at once. It pays 11-1, so each time it hits the player gets back 12, he does that 3 times out of each 38 spins. Yup. Still losing 5.26%. Now he gets to win three times out of each 38 spins, or 7.89% of the time.

You could have a wager that allows six, twelve or even eighteen numbers. All with the same mathematical (and financial) outcome.

So, what is the point to allowing the customer win three-times as often while keeping precisely the same expectation? It allows him to be more comfortable while he loses his money. And this is a good thing, don't you think?

But there is an interesting side-effect to this plan. You see, as players come and go, there is still a risk that someone could (heaven forbid) get lucky and, while betting very large sums of money conk you pretty good at a 35-1 clip.

What do I mean?

Well, what you have effectively done by adding these "proposition" bets is to lower the odds hat you have to pay when a player hits and that will usually lower your risk.

If you get a chance, go watch a busy roulette wheel in a casino somewhere. Imagine that everyone is playing the same betting unit no matter what color their chips are. What you will typically see is that in spite of a few big hits where a player has clustered her bets (remember when only women played roulette?) around a single number, most of the time the winners are paid off by the losers.

Same principle in a progressive-slot carousel. There is only one winner for the big hit at a given time.

So, what does all this have to do with "money management?"

First, there is more to a game than the advantage (or disadvantage). There is also hit rate. And one more thing... ruin.

We'll discuss that next.

[Dave Schwartz]

Ruin.

What does it mean?

In our discussion it means, "going broke."

In Alan Wilson's book The Casino Gambler's Guide, (Harper and Row, 1965), he addresses The Gambler's Ruin Problem in detail.

(Sure, you know all about The Kelly Criterion but do you know this one?)

Essentially, GRP answers the question: "What are my chances of doubling a stake with X units before losing the entire stake?"

More specifically, imagine that you are a roulette player. You come to Las Vegas every weekend. You play with precisely $100 each time. You always bet precisely $1 on red, an even-money bet. You play until you win or lose that $100. In other words, you are either walking away with $200 or nothing.

Every single weekend you travel to Las Vegas and bet that $100 one-dollar at a time. (Okay, so you don't have much imagination.) Week in and week out. Year in and year out.

The question is, "How often do you win?"

When I ask this question at seminars, I get all kinds of answers:

"Well, you've got a 5% disadvantage. That means you are winning just over 47% of the bets. 47% of 52 weeks would be 24 weeks, so I'd say you win about 24 times per year."

Or

"No, it would be worse than that. You gotta hit a big winning streak to overcome the losers. I'd say a little less, like maybe 20 times per year."



From Wilson's book:

This is a most important formula! Here, r(a) is the ruin probability when a player attempts to double a bank of a units. S stands for the success ratio, that is the ratio p/q where p is the probability of winning on any single play, and q is the probability of losing on any single play. This formula applies to any game with an even payoff.

So, let us look at our roulette player.

ruin = 1 / (1 + (SuccessRatio)^a)

Let's fill in what we know:

Success Ratio= ChancesOfWinning / ChancesOfLosing
Success Ratio= (18/38) / (20/38)
Success Ratio= 47.3684% / 52.6315
Success Ratio= 0.90000000

a=units = 100

ruin = 1 / (1 + (0.90)^100)
ruin = 1 / (1 + .0000265)
ruin = 1 / 1.0000265
ruin = .9999735

So, our roulette player, who I wrongly identified as you in the beginning of this article; you obviously are way to smart to attempt such a silly thing as trying to beat a game with a 5.26% disadvantage.

Anyway, our roulette player's chances of ruin is 99.99735%. That is so close to 100% as to be considered absolute. But permit me to put it into better perspective for you.

See that ".0000265" up there? That is his chance of winning one of these $100 bills. Look at it as a percentage. 0.00265%

Okay, let's try another way. If we divide 1 by this number we get how often he can expect to win. That number would be 37,735.8. Oh hell, we're all friends here. Let's just forget the point-eight and call it 37,735.

Okay, so back to the original question:

The question is, "How often does he win?"
Well, if he plays 52 weeks per year then he should expect one win every 725 years.

(Note: In my money management manuscripts, I reported it as 724 years. Calculator rounding will do that to you.)

Shall I go on?

[timtam]

All that math is fine but how many people at the wagering places even

give this stuff consideration? I see guys standing at the machines glancing

over their shoulders at any track any tote pounding out tickets. A simple

progression can make a days wagering fun providing you know when to stop.

Its like playing only the favorite with a mild progression sure you will

eventually lose but probably by the next day your on to something else.

I know keep these guys playing cause they're your competition but they're

always gonna be there.. I think most of the times our biggest opponent

is ourselves.

[douglasw32]

Dave, Thank You !
Very Insightful

[thebeacondeacon]

Originally Posted by shoelessjoe

Hi All, Im sure Im not the only one that has this problem but my money management really sucks.I feel this is just as important as being able to pick the right pacelines.If anyone has any suggestions on a good book other than the one by Barry Meadows I would like to know.If possible something that's geared to someone with a small bankroll.Someone did suggest Horse Racing Logic by Jones. Thanks Shoeless

Are you sure that it is your money management and not some other part of your game that is giving you trouble?

The reason I ask is that the two books you refer to cover very different subjects. Barry Meadow's book, "Money Secrets at the Racetrack", deals with engineering bets and the issues that Dave has raised.

However, Glendon Jones' "Horse Racing Logic" is really about contrarian handicapping and expectation. This is an essential but overlooked aspect of the game, that is sometimes confused with money management. I would think you could go pretty far applying the lessons from this book.

I have just started reading an impressive title, "Ten Steps to Winning", by Danny Holmes (a contributor to this forum), and if his money management section is as good as the handicapping portion, it is quite a gem. Also, there are a couple of books by Jerry Samovitz, mainly "Out of the Red and Into the Black", that you should also find helpful in structuring your bets, although I think his percentage of bankroll recommendations are still too high.

[shoelessjoe]

I have been looking for Horse Racing Logic but the book is out of print .The only copy available I could find was someone who wanted to sell it for 46 bucks not bad profit for a book that sold for 9.95.Shoeless

[hurrikane]

Dave's stuff is great and worth every dime.

Another book is Steve Fierro's 4 quarters of horse raceing.

As for all the people standing at the machines looking around and playing progression systems. That's why we can make money at this game. If it weren't for them it would be a lot tougher than is already is.