# Deeper Betting Knowledge Part 2: Using Monte Carlo Simulations To Evaluate Tipsters

Welcome back to the 2nd part of our look at the 12 Advanced Tipster Outputs we now publish in every SBC Tipster Review and how they can help reveal the best, most reliable tipsters.

If you missed Part 1, you can read it on the SBC Blog via this link.

Otherwise strap in for outputs 5 to 12, what they are and what they tell us about a tipster service…

#### 5) 50th Percentile Drawdown

This is obtained by the same method as that in the 99th percentile drawdown (#4 in part 1), although on this occasion, we look at the 50th percentile, This calculation indicates there is a 50% chance, i.e. even money, of a losing run in any given year to the current staking plan.

It indicates that, if a service is followed for two years, a bettor should absolutely expect to suffer a drawdown of this size at some point.

What To Look For: A figure that is absorbed by the suggested betting bank as we can expect this run to happen once every 2 years. Again, it’s useful for you as a punter as you might want to avoid services with big drawdowns likely to occur at least once every 2 years.

Recent Examples: One tipster provided quite a severe example of this in action as we discovered that their 50% percentile drawdown figure was a staggering 111% of the suggested betting bank (as put forward by the tipster themselves). Clearly this was inadequate and if following the tipsters bank suggestion, you should expect to go bust once every 2 years. It was no surprise this tipster did not receive a strong rating from the SBC team.

#### 6) 50% Bankroll Drawdown

Description: The result of this calculation, also known as the ‘semi-ruination’ figure, indicates how often one is likely to avoid a drop that eats half of the funds set aside for betting with a service.

It is a widely-held belief that some considerable resolve and confidence is required once you lose half of your betting bank. At the point that 50% of your bank goes, most people would quit.

What To Look For: The higher the percentile that this output gives, the better and the less likely one is to have to contend with such a 50% dip.

Recent Examples: One extreme example of a service with a poor 50% bankroll drawdown figure came in a review of a racing tipster from 2019, which indicated you should expect to see a peak-to-trough drop of this size in 82% of all years. Effectively meaning that every 4 out of 5 years you would lose half your bank and helping to highlight a very volatile service.

#### 7) Likelihood of a Losing Year

Description: A percentage figure that indicates how likely you are to suffer a losing year.

What To Look For: The lower the figure the better – especially for those of you who expect to play it ‘safe’.

Recent Examples: The extensive simulations that we have run during the last year show one top rated SBC Hall of Fame racing tipster to have the lowest probability of a losing year. In fact, our Monte Carlo simulator ran 5000 seasons covering almost 28m bets and not one losing year was encountered!

The highest probability recorded was just over 49% by a poorly rated racing service. This meant that a loss should be expected every other year if following and it is of little surprise that this service ended a few months after our analysis.

#### 8) Risk Reward Ratio

Description: This ratio is obtained by taking the average annual profit divided by the average annual drawdown over the period of the review.

What To Look For: The higher the number the better and for no huge disparity between the live and simulation results.

Recent Examples: Anything above a score of 2 can be regarded in a positive light (classed as ‘excellent’) and several recent tipsters all achieve this with a very high score for one racing service who hit a mark of 3.427..

#### 9) Capital Risk Ratio

Description: The Capital Risk ratio is a simple calculation that represents the percentage of the bankroll consumed by the maximum drawdown suffered.

What To Look For: The lower the number the better and again parallels between the tipster’s live results and simulation results are welcome.

Recent Examples: If a tipster’s largest drop is less than one-third (33%) of their recommended bank, then this wins a rating of ‘excellent’. A score of more than 66% is a concern and noted as ‘poor’ and, again, intermediate figures are labelled as ‘strong’ and ‘average’.

A recent NFL tipster we reviewed leads the way in this exercise with a ratio of 17.20% with several others all featuring around the 22% mark. These all constitute an excellent Capital Risk Ratio score.

#### 10) Dispersion Factor

Description: The dispersion factor indicates the degree of instability or uncertainty that should be expected when following a tipster. We use the simulations to produce best and worse-case strike-rates, disregarding the top and bottom 5% of results.The dispersion factor is the ‘near-best’ figure divided by the ‘near worst’, i.e. taking the 95th and 5th percentiles.

This output is routinely used to remove the outliers or freak results such as a one-off 200/1 winner or others that vary from the norm.

What To Look For: The lower the factor, the less volatile the tipster should be.

Recent Examples: A recent SBC review tackled a tipster with an excellent ROI of over 30%, but as one targeting bets at over 10/1, it can be a volatile service to follow. This is reflected by the fact they have a dispersion factor rating of 1.796, which is rated as ‘high’.

This follows the accepted wisdom that any investment with a high reward, for example a ROI of over 30%, comes at a high risk.

#### 11) Sharpe Ratio

Description: This is a relatively new index that we have introduced into our analysis work to provide a measure with which we can compare a tipster’s annual betting bank growth.

It compares this growth against the UK’s average ‘risk-free’ investment rate over the review period. Effectively – what kind of interest rate you might enjoy if putting your money in guaranteed sources such as a bank savings account or a government bond. The risk-free rate has been consistent over the last few years at around 2.1% (although may admittedly be changing in this current climate). The ratio is the average ROC returned in excess of this figure.

What To Look For: The higher the number the better. It is also a good examination of what you can make in comparison to other savings options out there.

#### 12) P-Value

Description: An incredibly useful output, the p-value is a statistical test to evaluate the probability of obtaining a set of results by chance (as opposed to skill). It is obtained from an algorithm that uses three variables: overall strike rate, ROI and the average odds of all selections.

What To Look For: The lower the number the better and as close to 0 as possible. A high number indicates either a lack of live data or a set of results that might be based on luck.

Recent Examples: ‘Low’ probability covers the range between 0 and 0.025, whilst a result of between 0.025 and 0.05 is seen as ‘moderate’, with p-values in excess of this being taken as ‘high’. To complete the picture, a p-value of 1 would indicate absolute certainty that the results have been obtained by pure chance alone.

Several strongly rated tipsters we have reviewed recently had p-values of zero, which suggest that the results obtained were 100% based on skill and there is no luck element to be found. There are also numerous other tipsters that have gone under our result microscope, each of whom had very low p-value scores.

Those with higher p-value scores are usually those tipsters either targeting bigger priced selections OR those with smaller data sets than we would like. For example, one promising golf tipster had a high p-value of 0.3130 as he had put up less than 600 tips over 3 years and at a strike-rate of 20.54%. Highlighting this as a tipster or promise, yet one we clearly need more data for before rushing to invest our money in his advice.

High scores could, but not necessarily, indicate that a tipster has changed methodology of selection during the review period and this is something we would test with the tipster.

#### Advanced Tipster Analytics Wrap

I do hope you have enjoyed this special 2-part guide on these Advanced Tipster Outputs and just how they can help you discover more about betting services.

They go further than simply evaluating which tipsters are good or not, but into other key areas such as losing runs, bank sizes and the level of risk if following them in.

All these outputs are important so you can fully understand which tipsters you should follow and those that suit your personality.

If you want to know more, then you can explore the full Advanced Tipster Analytics Guide with a Smart Betting Club membership. Best of all – you can read the 12 scores and ratings for each tipster we review based on the Monte Carlo Simulations we perform as standard.

All of which are designed to give you every bit of information to help you choose the best tipster services for you!

#### SBC Helping Inform Your Betting Over The Next Few Months

Whilst there isn’t a huge amount for us to bet on right now, we are using this quiet betting period to publish a series of quality reviews, articles and insightful guides to help deepen the expertise of SBC members.

Mindful of the fact that many of you are using this time without sport to improve your knowledge and understanding of the betting and tipster world, our role is to help fill that gap with informative, educational and quality content.

Tackling everything from helping develop and understand your betting risk profile, the psychology of a winner, Advanced Tipster Analytics and guides to betting on new sports, you can expect to read a lot as an SBC member over the next few months.

As ever, membership comes with a full 30 or 90 day money back guarantee, so if you are looking to develop your betting skills, do consider a Smart Betting Club subscription.

Best regards

Peter Ling

Smart Betting Club Owner and Founder