By this stage, we should have a fully tested and potentially profitable selection system.

We should also have calculated the selection system’s strike rate and also the maximum number of consecutive losing bets that the selection system is likely to encounter.

We should, therefore, be in a position to determine the maximum stake that can be reasonably invested on each selection without causing untold damage to our financial resources should we lose a bet.

As we saw in the previous article on betting banks, we should also have decided upon the size of, and created, our betting bank.

This information, at first glance, appears to be more than sufficient for our needs, but is it?

The answer to this question is obviously ‘No’, otherwise, you would now be nearing the end of all these articles!

There is still much to learn and understand before we are in a position to venture forth into the big bad world that is betting.

The next topic that I wish to cover is staking plans.

A staking plan is a method that ensures that bets are placed in as logical, structured and efficient a manner as possible.

Staking plans ensure that maximum profit is extracted from a selection system.

A staking plan is, in some ways, as important, if not more important, than a selection system.

A good staking plan can often overcome any short-comings in a selection system.

There are many different staking plans. Some even have some interesting variants to consider.

The most commonly used staking plans are the following:

The Fixed Stakes Staking Plan

The fixed stakes staking plan is one of the most basic, frequently used and easily understood of all.

It involves placing a fixed amount on each selection, generated by a system, regardless of the odds.

If a selection is backed to win, the amount that would be lost if the selection were to lose is a fixed amount and is equal to the stake.

The amount that would be won if the selection were to win varies with the odds.

The greater the odds, the greater is the amount which is won.

For example, if a stake of £5 is used and the odds of the selection is 3/1, then if the selection wins, the profit will be £5 x 3 = £15.

If a stake of £5 is used and the odds of the selection is 6/1, then if the selection wins, the profit will be £30 (5 x 6).

In both cases, if the selection loses, the original stake of £5 would be lost.

If a selection is layed to lose, the amount that would be won if the selection were to lose is a fixed amount and is equal to the stake.

The amount that would be lost, if the selection were to win, varies with the odds.

The greater the odds, the greater is the amount which is lost.

For example, if a stake of £5 is used and the odds of the selection is 3/1, then if the selection wins, the loss will be £15 (5 x 3).

If a stake of £5  is used and the odds of the selection is 6/1, then if the selection wins, the loss will be£30 (5 x 6).

In both cases, if the selection loses, £5 will be won.

This system has the advantage that it is quick and simple to understand and use and does not involve any complex mathematics other than basic multiplication.

It also has the advantage that the performance of several selection systems can easily be compared.

This allows for the best-performing systems to be retained and the worst to be discarded.

The main disadvantage of this plan is that, when laying the longer-priced selections, the liability of the bets can get a little high.

For example, if we were to lay a horse to lose whose odds are 50.0 on a betting exchange and we used a stake of £2, if the horse loses, we would win £2.

If the horse wins, however, we would lose £2 x (50 - 1) = £2 x 49 = £98.

Some followers of horse racing advocate that if a selection system cannot make a profit using a fixed stakes staking plan, then it should be discarded.

The Fixed Liability Staking Plan

The fixed liability staking plan is also one of the most basic, frequently used and easily understood of all staking plans.

It involves placing a bet in such a way that, should we lose a bet, a fixed amount would be lost, regardless of the odds of the selection.

If a selection is backed to win, the amount that would be lost if the selection were to lose is a fixed amount and is equal to the stake.

The amount that would be won if the selection were to win varies with the odds.

The greater the odds, the greater is the amount which is won.

For example, if a stake of £5 is used and the odds of the selection is 3/1, then if the selection wins, the profit will be £5 x 3 = £15.

If a stake of £5 is used and the odds of the selection is 6/1, then if the selection wins, the profit will be £30 (5 x 6).

In both cases, if the selection loses, the original stake of £5 would be lost.

If a selection is being layed to lose, the amount that would be lost, if the selection were to win, is fixed, regardless of odds.

If the selection were to lose, a variable amount, which is determined by the odds of the selection, would be won.

To illustrate this point, let us consider this example: Let’s say that we are prepared to lose a maximum of £20 per bet.

Our liability is therefore set at £20. To calculate the stake, we subtract 1 from the betting exchange lay odds and then divide the result into our liability, which we have fixed at £20.

If the betting exchange lay odds of our selection are 6.0, we simply subtract 1 from the odds, which gives us 5, and then divide 5 into £20, which gives us £4.

The stake on the bet is therefore £4.

If the selection loses, we will win £4.

If the selection wins, we will lose £20.

Let’s take another example.

If the betting exchange lay odds of our selection are 5.0, we simply subtract 1 from the odds, which gives us 4, and then divide 4 into £20, which gives us £5.

The stake on the bet is therefore £5.

If the selection loses, we will win £5.

If the selection wins, we will lose £20.

Notice that in both cases, the amount lost, should the horse win, will be the same i.e. £20.

In the first case, if the horse loses, we will win £4.

In the second case, the amount won would be £5.

This difference in he amount won is due to the difference in the odds of the two selections.

This staking plan has the advantage that the loss on each bet is fixed and known.

Therefore, the day’s potential losses can be quickly and easily determined by simply multiplying the number of intended bets by the fixed liability per bet.

The plan is also useful when laying longer-priced selections since the liability can be limited to a fixed amount.

The main disadvantage of this plan is that the stake must be calculated for each bet individually.

A calculator, spreadsheet or good mental arithmetic abilities is therefore required.

The Fixed Percentage of Bank Staking Plan

This staking plan involves placing a bet such that the liability on each bet is equal to a fixed percentage of the betting bank.

Typically, those who regularly place bets on horses allocate between 1% and 5% of their betting bank to each bet.

We would, however, recommend that a more scientific, rather than random, approach is taken and that the percentage of the betting bank used is calculated using the selection system ’s maximum expected losing run, as described in the article on losing runs.

If a selection is to be backed to win, the fixed percentage of the betting bank is applied to the stake of the bet.

If a selection is to be layed to lose, the fixed percentage of the betting bank is applied to the liability of the bet.

To illustrate the above, suppose that we have a betting bank of £1,000 and that we decide to allocate 5% of the betting bank to each bet.

If a selection is to be backed to win, the 5% is applied to the stake of the bet.

The stake therefore = £5 x 1,000/100 = £5 x 10 = £50.

If a selection is to be layed to lose, the 5% is applied to the liability of the bet.

The liability therefore = £5 x 1,000/100 = £5 x 10 = £50.

The stake is calculated by dividing the liability (£50) by the odds of the selection.

If the current bet wins, the stake or liability on the next bet is increased in line with the new betting bank balance.

If the current bet loses, the stake or liability on the next bet is decreased, again in line with the new betting bank balance.

To illustrate this point, suppose that we begin with a betting bank of £1,000 and that we decide to allocate 5% of the betting bank to each bet.

Let’s further suppose that we win £100 by backing a horse to win at 2/1 using a stake of £50 (5% of our betting bank).

At this point, the betting bank will have increased to £1,100.

If we decide to back the next selection to win, the stake and liability become: £5 x 1,100/100 = £5 x 11 = £55.

If we decide to lay the selection to lose, the liability becomes: £5 x 1,100/100 = £5 x 11 = £55.

The stake is calculated by dividing the liability (£55) by the odds of the selection minus 1.0.

Notice that the stake and liability have increased by £5 to £55.

This is due to the previous win which increased the size of the betting bank by £100.

Now let us look at the following example: Suppose that we begin with a betting bank of £1,000 and that we decide to allocate 5% of it to each bet.

Let’s further suppose that we lose £50 after backing a horse to win at 2/1 using a stake of £50 (5% of our betting bank).

At this point, the betting bank will contain £1,000 - £50 = £950.

If we decide to back the next selection to win, the stake becomes: £5 x 950/100 = £5 x 0.95 = £47.50.

If we decide to lay the next selection to lose, the liability becomes 5 x 950/100 = £47.50.

The stake is calculated by dividing the liability (£47.50) by the odds of the selection minus 1.0.

Notice that the stake and liability have decreased by £2.50 to £47.50.

This is due to the previous loss which decreased the size of the betting bank by £50.

The main advantage of this plan is that it maximises the number of bets that can be made from a betting bank of a given size because, as the size of the betting bank decreases, so do the stakes (and liabilities).

A further advantage of this plan is that the size of the future bets only increases in line with the increase in the betting bank.

Losses are therefore limited and containable. Likewise, as losses are sustained, the size of future bets is reduced in order to minimise the impact of future losses on the betting bank.

The main disadvantage of this plan is that losses are recovered at a lesser rate than that at which they are incurred since, following a loss, the stakes/liabilities are reduced.

Using this plan, therefore, betting banks tend to become slowly depleted over the long term.

To illustrate this point, let us take a look at this example.

For the sake of simplicity, the commission levied by the betting exchange on all winning bets will be ignored.

Example 1

Bet 1 Bank: £1,000 Bet Type: Lay Odds: Evens Stake: £50 (5% of bank) Result: Lost bet New Bank: £950

Bet 2 Bank: £950 Bet Type: Lay Odds: Evens Stake: £47.50 (5% of bank) Result: Won bet

New Bank: £997.50In the above example, even though one bet was won and one bet was lost and the odds, associated with each bet, were identical, there was a net loss of £2.50 over the two bets.

The reason for this is that the first bet was lost using a stake of £50 whereas the second bet was won using a stake of only £47.50.

Hence, the second bet recovered less than was lost on the first bet.

Therefore, there was an overall loss over the two bets.

Now let us continue the process:

Bet 3 Bank: £997.50 Bet Type: Lay Odds: Evens Stake: £49.88 (5% of bank) Result: Lost bet New Bank: £947.62

Bet 4 Bank: £947.62 Bet Type: Lay Odds: Evens Stake: £47.38 (5% of bank) Result: Won bet New Bank: £995.00

Notice that on bets 1 and 2, £2.50 was lost.

Notice also that a further £2.50 was lost on bets 3 and 4. In fact, if we continue this process, more and more of the betting bank will be lost until, eventually, the whole of it will be lost.

This is a serious disadvantage of this staking system In order to eliminate this disadvantage, one option is to employ a ‘ratchet’ mechanism.

This involves increasing the size of the bet only when the betting bank balance has exceeded its previous highest level.

It also involves never reducing the stake/liability, even though losses are incurred.

By way of an illustration, let us consider the following example:

Example 2

Bet 1 Bank: £1,000 Bet Type: Lay Odds: Evens Stake: £50 (5% of bank) Result: Lost bet New Bank: £950

Bet 2 Bank: £950 Bet Type: Lay Odds: Evens Stake: £50.00 (5% of £1,000 bank) Result: Won bet New Bank: £1,000.00

If we compare Bets 1 and 2 of Example 2 with Bets 1 and 2 of Example 1, we will see that, in Example 1, £2.50 was lost over the two bets.

In Example 2, a break-even situation was achieved because, following the loss of bet 1, the stakes were not reduced, as they were in Example 1.

As a result, the loss incurred in bet 1 in Example 2 was completely recovered in bet 2 because the stake was maintained.

Now let us continue the process:

Bet 3 Bank: £1,000.00 Bet Type: Lay Odds: Evens Stake: £50.00 (5% of bank) Result: Won bet New Bank: £1,050.00

Bet 4 Bank: £1,050.00 Bet Type: Lay Odds: Evens Stake: £52.50 (5% of bank) Result: Won bet New Bank: £1,102.50

After this point, regardless of how little funds remain in the bank, the minimum stake/liability will be £55.13 (5% of £1,102.50).

The stake/liability will only be increased if the funds in the bank ever exceed £1,102.50 in the future.

However, the stake/liability will never fall below £55.13.

Although the addition of a ratchet mechanism to the Fixed Percentage of Bank staking plan overcomes the system’s main disadvantage, a long losing run will cause funds to be lost at a rate greater than that of the staking system without the ratchet mechanism applied.

In spite of this disadvantage, we advise that if the Fixed Percentage of Bank staking plan is used, then, the ratchet mechanism should also be used.

The Fixed Stakes, Fixed Liability and Fixed Percentage of Bank are not the only staking plans that exist.

There are many, many others. In fact, whole books have been written about this subject.

However, these three staking plans are the most commonly used staking plans.

We recommend that when bets are placed, a staking plan is used to generate the stakes or liabilities for the selections generated by a system rather than placing random amounts of money on selections.

A staking plan ensures that resources (money) are used in an efficient and an effective manner as possible.

We also recommend that the Fixed Percentage of Bank staking plan is used and that the percentage of the bank used as the stake/liability is calculated using the maximum number of losing bets that are likely to be encountered by the selection system.

This is fully described in the article on losing runs.

This will ensure that any losses incurred or mistakes made will not have a drastic consequence on the size of the betting bank and that sufficient funds will remain in order to recover losses.

We also recommend that the ratchet mechanism is also implemented. This will ensure that the betting bank will not be eroded with time.