The dangers of losing and how to deal with them.

One of the tipsters in my portfolio is having rather a tough time of things at the moment.  All will become clear as to who when I post up my review of last month’s betting, which I plan to do this coming weekend.  I thought in the meantime though that I’d write a little on how losing affects us and the way we approach our betting.

Common mistakes to watch out for.

What I have found over the years is that a spell that sees us consistently lose, very often leads us to making mistakes with our betting.  I remember reading somewhere that our brains are wired up in such a way that the effect of a losing bet has a far bigger impact on our psyche than does a winning bet.  Put another way, we are likely to find it harder to maintain a mental equilibrium when we are losing money than when we are winning money.

So what are the common mistakes that we must be so aware of avoiding when we are enduring a slump in our betting?

From personal experience, the biggest temptation is to lower stakes.  We’re losing money, perhaps at a frightening pace, so our subconscious instructs us to slow down the rate of loss…and we can do that by not betting as much.  The trouble with this of course, is that when the tipster you’re following regains their form – or, more likely if they have a proven long term edge, they come out of a period of what is simply natural variance having an effect – you’re rate of recovery is much slower than your rate of loss.  To use a mathematical illustration, if your losing service loses 50 points and your stake per point is £10, then obviously your drawdown is £500.  If when you’re £500 down you reduce your stake/point to £5, then when the tipster regains those 50 points, you’ll only have made £250.  You’re still £250 down when you should be level.

Personally speaking, I would now rather give up following a tipster completely than reduce stakes.  But of course, that is another very common mistake made by those who are going through a tough time.  It is so, so easy to convince yourself that your tipster has lost his edge when in reality he has done no such thing.  During a prolonged losing spell, it is inevitable that doubts creep into our heads about what we see as the cause of our pain – ie. the tipster we’re following who seemingly has lost the ability to back a winner.

I’ve done it myself, and more than once…say enough is enough with a tipster, and then check up on that tipster’s performance a few months later to see that he has regained all the losses I suffered and had kicked on to start making good profit again.  It’s enough to make you seriously question whether or not betting is for you.  And to be quite honest, if this is something you do on a repetitive basis, then perhaps betting isn’t for you.

The importance of preparation

So how do you prevent yourself from falling into these traps?

The simple answer is prior preparation.  Set your betting off on the correct footing and you will better prepare yourself for the tough times.  Here is a quick checklist of things you should and shouldn’t do:

  • THE most important thing is not to bet with money you can’t afford to lose.
  • Separate your betting funds from your day to day living expenses.
  • Don’t chase big profit right from the start – far better to start slowly with your betting and by reinvesting profit, build up your betting steadily as you go along.
  • Don’t set your expectations too high – better to aim for 25% ROC and be pleased with 50% than set your target at 100% and be disappointed/frustrated with 50%.
  • Be conservative with your betting banks for each tipster, particularly in the beginning – if the recommended bank is 80 points, there’s no harm is assigning 100 points to a service.  Doing so will give you an extra cushion during a rough patch,
  • Research any service you are considering before you join – see what their historical drawdown figures are and how long they took to recover from.  It will provide your betting with a relevant context.

Of course, there does come a point when it is right to stop following a service.  Deciding when is a very difficult thing to do and can be the subject of a different blog post.

I hope you’ve found this post useful.  Back over the weekend with a round-up of a not-too-pretty April…

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