Loss Recovery Systems

Don't chase your losses, it doesn't work. You will eventually bust your bank.
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Derek27
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The Silk Run wrote:
Tue Oct 13, 2020 12:16 pm
Welcome Morbious

From my personal perspective I do use Loss Recovery with great success, and long-term. I formulated my own system that is rather aggressive and used in my automation strategies. I think it works for some, and not others. And I think some members will listen to the responsible advice given by the Gambling Commission.

Good luck
Minnie LAI
'Loss recovery' is quite a broad term, but any strategy that involves increasing stakes or placing bets purely and solely because a previous bet lost is mathematically flawed. If such a system makes a profit it's not necessarily the staking plan that works but the strategy itself.
rik
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Derek27 wrote:
Tue Oct 13, 2020 12:06 pm
rik wrote:
Tue Oct 13, 2020 11:45 am
Derek27 wrote:
Tue Oct 13, 2020 11:11 am

By 100% of the time, I think you mean 100% certain of losing eventually. All loss recovery systems that involve increasing stakes will lose eventually, unless you have a system that will win for eternity! We all have limits whether it's a house limit or your bank limit.

viewtopic.php?p=225047#p225047
mathematically you will lose eventually, that said not everyone using loss recovery is completely degenerate increasing stakes forever
its plausible someone didnt reach their limit for a while, paid out some money over time and on their max losing run what their willing to risk lost less than what they made overall
still anyone using higher stakes due to previous losses either doesnt understand math or likes to gamble
That's unlikely to happen in a loss recovery system that recovers your entire losses, because you're winning peanuts and in a losing run you must have lost a massive amount to decide not to carry on increasing stakes.
thats incorrect, if your bets/trades were +expected value your more likely to double up than go bust
you had your example on roulette that covering a max losing run of 10 will result in 27% of doubling the bank
so if they paid out the 0 so you had a 52% instead of 48% chance to recover a loss that would therefore make 73% of doubling the bank

probably some guys will try to use the double bank to cover the 11th double up but others might still stick to their limit of 10

first problem is that 99% of people using martingale wont be able to find +expected value as they lack math in the first place

second problem doubling up 10times means your regular stake is 1/1023 so will take 1023 winning bets to double up, not efficient

third problem you still have 27% chance of losing your initial bank despite betting +expected value

on contrary if you bet a 1000 times with level stakes and 52% win rate your at 99% profitable. longer you bet the only realistic reason for being down is not getting value
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Derek27
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rik wrote:
Tue Oct 13, 2020 12:45 pm
Derek27 wrote:
Tue Oct 13, 2020 12:06 pm
rik wrote:
Tue Oct 13, 2020 11:45 am


mathematically you will lose eventually, that said not everyone using loss recovery is completely degenerate increasing stakes forever
its plausible someone didnt reach their limit for a while, paid out some money over time and on their max losing run what their willing to risk lost less than what they made overall
still anyone using higher stakes due to previous losses either doesnt understand math or likes to gamble
That's unlikely to happen in a loss recovery system that recovers your entire losses, because you're winning peanuts and in a losing run you must have lost a massive amount to decide not to carry on increasing stakes.
thats incorrect, if your bets/trades were +expected value your more likely to double up than go bust
you had your example on roulette that covering a max losing run of 10 will result in 27% of doubling the bank
so if they paid out the 0 so you had a 52% instead of 48% chance to recover a loss that would therefore make 73% of doubling the bank

probably some guys will try to use the double bank to cover the 11th double up but others might still stick to their limit of 10

first problem is that 99% of people using martingale wont be able to find +expected value as they lack math in the first place

second problem doubling up 10times means your regular stake is 1/1023 so will take 1023 winning bets to double up, not efficient

third problem you still have 27% chance of losing your initial bank despite betting +expected value

on contrary if you bet a 1000 times with level stakes and 52% win rate your at 99% profitable. longer you bet the only realistic reason for being down is not getting value
Sorry rik, that's wrong. Here's the maths:

(1 - (18 / 37) ^ 10) ^ 1023 = 0.4677

That's a good example of how you could be given an opportunity to make a fortune and blow it by incorrect staking. Basically, even if you're backing value selections, overstaking, as Kelly shows will result in losses.
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wearthefoxhat
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Morbius wrote:
Tue Oct 13, 2020 11:26 am
Derek27 wrote:
Tue Oct 13, 2020 11:11 am
Morbius wrote:
Tue Oct 13, 2020 8:28 am
What I forgot to mention in the OP and in regards to something that was troubling me was in the difference between a martingale on roulette which because of table limits must lose 100% of the time over time and something that is structurally similar in horseracing where there are factors that make it different.

My problem and what I couldn't figure out was if a loss avoidance system or whatever you want to call it wouldn't lose 100% of the time in the long run like a conventional martingale but would in fact be profitable over time but this time period and the stochastic process left it difficult to see the end of the road when large losses are warping our perception. So bottom line, I was wondering if long sequences of winning races were overcoming the large losses but it took maybe a much longer sample size to prove profitability than many people were allowing for.

Sorry if I am waffling again lol
By 100% of the time, I think you mean 100% certain of losing eventually. All loss recovery systems that involve increasing stakes will lose eventually, unless you have a system that will win for eternity! We all have limits whether it's a house limit or your bank limit.

I've explained the maths behind the Martingale in the post below and it really applies to anything where the true probability is worse then the odds you're taking - it applies equally to horse racing or trading.

viewtopic.php?p=225047#p225047

Actually Derek as one of the previous posters alluded to as did Peter, the title of this thread may have been worded badly and I apologise for that but as someone pointed out, the method I have been using while escalating has also been trying to use "dollar cost averaging" principles to erase a current red screen but I have run into problems when prices never retraced enough to go green and just like with options, theta (time decay) is a serious issue in these markets I am finding but is old news to all on here :)
Dollar cost averaging with leveraging (borrowing money to gamble with) was what broke Barings Bank (Nick Leeson)

Essentially, he got away with it the first time, covering their position and creating a chunk of commission along the way....the rest is history...

https://www.thestreet.com/opinion/5-inv ... r-13538186
rik
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Derek27 wrote:
Tue Oct 13, 2020 1:10 pm
rik wrote:
Tue Oct 13, 2020 12:45 pm
Derek27 wrote:
Tue Oct 13, 2020 12:06 pm

That's unlikely to happen in a loss recovery system that recovers your entire losses, because you're winning peanuts and in a losing run you must have lost a massive amount to decide not to carry on increasing stakes.
thats incorrect, if your bets/trades were +expected value your more likely to double up than go bust
you had your example on roulette that covering a max losing run of 10 will result in 27% of doubling the bank
so if they paid out the 0 so you had a 52% instead of 48% chance to recover a loss that would therefore make 73% of doubling the bank

probably some guys will try to use the double bank to cover the 11th double up but others might still stick to their limit of 10

first problem is that 99% of people using martingale wont be able to find +expected value as they lack math in the first place

second problem doubling up 10times means your regular stake is 1/1023 so will take 1023 winning bets to double up, not efficient

third problem you still have 27% chance of losing your initial bank despite betting +expected value

on contrary if you bet a 1000 times with level stakes and 52% win rate your at 99% profitable. longer you bet the only realistic reason for being down is not getting value
Sorry rik, that's wrong. Here's the maths:

(1 - (18 / 37) ^ 10) ^ 1023 = 0.4677

That's a good example of how you could be given an opportunity to make a fortune and blow it by incorrect staking. Basically, even if you're backing value selections, overstaking, as Kelly shows will result in losses.

your right i was too quick to assume could just reverse the probabilities
it must be skewed in that way because your winning more if you dont hit the 10 losing sequence in the 1023 bets
if you dont hit it you double up, but if you hit the losing sequence you still have the bets you won before you hit it, say you hit it after 500 wins your only down about half of your initial bank
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Kai
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I think averaging in general is a perfectly good trading approach, as long as your upside surpasses your potential losses.
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Morbius
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Derek27 wrote:
Tue Oct 13, 2020 12:38 pm
The Silk Run wrote:
Tue Oct 13, 2020 12:16 pm
Welcome Morbious

From my personal perspective I do use Loss Recovery with great success, and long-term. I formulated my own system that is rather aggressive and used in my automation strategies. I think it works for some, and not others. And I think some members will listen to the responsible advice given by the Gambling Commission.

Good luck
Minnie LAI
'Loss recovery' is quite a broad term, but any strategy that involves increasing stakes or placing bets purely and solely because a previous bet lost is mathematically flawed. If such a system makes a profit it's not necessarily the staking plan that works but the strategy itself.

Am I being ignorant Derek because it seems to me to be different in regards to trading because your first "loss" isn't a loss if you don't take it. Many financial traders don't use stop losses and granted these are longer term markets as Peter alluded to in one of his replies. However a second larger entry not only has the ability to erase the previous "loss" but is entering the market at a new "breakeven" in a market that wildly oscillates. But I understand your point in that if such a staking system works then its the strategy and not the system but I do know that such systems work under certain circumstances albeit tiny and was wondering if this applied to horse racing pre-race markets. Or is the market simply behaving in a way that essentially makes such a strategy a "martingale" by default???
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Kai
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Morbius wrote:
Tue Oct 13, 2020 2:46 pm
But I understand your point in that if such a staking system works then its the strategy and not the system but I do know that such systems work under certain circumstances albeit tiny and was wondering if this applied to horse racing pre-race markets. Or is the market simply behaving in a way that essentially makes such a strategy a "martingale" by default???
You would have to know your ranges quite well to make it work on prerace, would get murdered otherwise.

Since you're already familiar with the concepts of dollar cost averaging and such, I can say that I've used different averaging approaches to good effect on 4 sports, 2 of which were inplay, so I know there's a time and a place in the markets for most strategies, including averaging.

Although to be honest I didn't know about it beforehand and sort of stumbled into it naturally through my trading since it seemed the most effective way to manage my positions, and to be brutally honest with myself, a part of my trading style was for the most part born out of me trying to avoid some of the losses when I've read things wrong.

It's a massive topic for me, endless really, and I'd love nothing better than to discuss it at great length but there's always that annoying limit when you talk about your own trading. But yeah, it's one of the things I enjoy the most in trading, the game of managing your positions.
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Morbius
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Kai wrote:
Tue Oct 13, 2020 3:12 pm
Morbius wrote:
Tue Oct 13, 2020 2:46 pm
But I understand your point in that if such a staking system works then its the strategy and not the system but I do know that such systems work under certain circumstances albeit tiny and was wondering if this applied to horse racing pre-race markets. Or is the market simply behaving in a way that essentially makes such a strategy a "martingale" by default???
You would have to know your ranges quite well to make it work on prerace, would get murdered otherwise.

Since you're already familiar with the concepts of dollar cost averaging and such, I can say that I've used different averaging approaches to good effect on 4 sports, 2 of which were inplay, so I know there's a time and a place in the markets for most strategies, including averaging.

Although to be honest I didn't know about it beforehand and sort of stumbled into it naturally through my trading since it seemed the most effective way to manage my positions, and to be brutally honest with myself, a part of my trading style was for the most part born out of me trying to avoid some of the losses when I've read things wrong.

It's a massive topic for me, endless really, and I'd love nothing better than to discuss it at great length but there's always that annoying limit when you talk about your own trading. But yeah, it's one of the things I enjoy the most in trading, the game of managing your positions.



Hi Kai, thanks for your response and as you have probably already deduced, this is a big topic for me too. I have spent a large amount of time studying financial markets without actually trading but with a view to possibly using some of the same principles on the exchanges but allowing for the nuances which I am hoping to pick up over time hence why I am on the forum. I always felt that there was something there with a dollar cost averaging strategy which I know isn't strictly speaking a loss recovery although it has elements of one.

I get what you are saying regarding ranges and the entry levels are key but as you also correctly pointed out, you can get murdered and I have been :D

But trying to not make the same mistake again although I am now leaning towards just having a conventional stop loss in this time sensitive market. A key problem for me was when a market trended substantially without adequate retracement to overcome losses and additional spread and then ranged at the end of it which all pre-horse racing markets do of course as they travel towards their respective SP's. This would be less of an issue in currencies assuming you were leveraged right but the cut off point of a horseracing market creates problems that I haven't solved as yet and not sure that I can and if I am barking up a tree that many older heads deserted years ago lol
Last edited by Morbius on Tue Oct 13, 2020 3:53 pm, edited 1 time in total.
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Morbius
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I am feeling a little self conscious already and its only been a day on the forum and all I ask is questions....hope the members don't mind but I don't know who else to ask :)

In regards to Dollar Cost Averaging strategies on the exchanges and to what Kai alluded to with ranges, do members think that this sort of strategy is better left to longer term financial markets and Investment Banks/Hedge Funds and the short term nature of horseracing markets makes it very difficult to execute???

I tried to estimate ranges on the pre-off markets but even when you get this right its the big trends followed by a ranging market that do you in. I can't find a way around this problem. Part of me thinks I am almost there because my strike rate is 90%+ but am finding it difficult to get ahead because of the aforementioned big losses which are also very disheartening but then a part of me thinks I am going down a blind alley with trying one of the financial market concepts that simply doesn't transpose onto a pre-race betting exchange.
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Kai
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Yeah, prerace markets can be a bit of a nightmare for the more one-dimensional approaches, so it's no surprise to see a lot of new people struggle. But this topic goes far bigger than prerace markets, which is a market where I mostly used scalping approaches and have no interest in (manually) swinging it anymore I'm pretty sure.

I say it's a very big topic because a lot of traders average out (spread out) their exits, but they don't really average their entries to that same extent, so their entry is mostly one-dimensional.

And why is that? Just because it gets a bit uncomfortable managing a position from the red side? :)

"Oh noes, I didn't get my flat stake entry spot on and I've made a bit of a loss because my trade didn't instantly run into profit. Ah well, I guess I'm supposed to automatically accept this loss now, like a good trader is supposed to." :)

Is it as clear-cut like that or is there more to it?

I feel it's hard to be so defensive with entries when the market itself is so aggressive, so for me it makes more sense to be more aggressive. I've seen even complete newbies manage their exits like a pro, almost on autopilot because they've seen others do it so many times in videos, so it's obviously not difficult to manage your position when it goes well from the start, but I think what makes or breaks a trader is how well he manages his losses and less than ideal entries etc.

I think the reason why people talk about "doubling up" and martingale is because a lot of people use flat staking, so as soon as you add the second stake you basically already "doubled up" on your trade and it feels like you're chasing losses etc, that's what I mean when I say position management becomes one-dimensional and you're forcing yourself or the market to be either right or wrong, without much middle ground. When in reality most of my actual trading is composed of middle ground stuff, for the most part I average out my results whether I'm right or wrong, if that makes sense :)

I for example like to be more flexible and stake only according to my confidence, which depending on what I'm trying to do usually means I spread out my initial entries with smaller stakes and then manage the position size from there accordingly, so I regularly add to the position whether it's going in profit or loss, for as long as I feel I'm taking decent valuable prices. Depending on price range I may spread out the entries every 2 or 3 ticks, and sometimes I read it wrong and the market ends up endlessly pushing against me but I'm usually often within scratching distance anyway because I keep adding and taking stakes out and buying myself a tick or two space etc. On the rare occasion that the market is completely one-dimensional with its fillrate and I'm unable to get anything matched on the other side, then I either have to start taking some losses or sit on it for a while if it's temporary and evaluate.

It's obviously not an exact science and sometimes I get pushed a bit more into loss, but usually doesn't take much at all for my position to start looking healthy again, and the upside can be pretty good from that point on as you can imagine. I confess that I am a bit lazy with my entries and like to get involved as soon as possible without patiently waiting for good entries, which means I sometimes play the averaging game.

In other words, I arrive at a market and do a rough evaluation of the ranges and then just try to get matched at what I consider good prices, and while I wait for bigger swings of price to come (if they even come) I try to make the most of the market noise by adding more ticks to my position from scalps and such, so the odds are always stacked in my favor, so to speak.
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Kai
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Morbius wrote:
Tue Oct 13, 2020 8:28 am
My problem and what I couldn't figure out was if a loss avoidance system or whatever you want to call it wouldn't lose 100% of the time in the long run like a conventional martingale but would in fact be profitable over time but this time period and the stochastic process left it difficult to see the end of the road when large losses are warping our perception. So bottom line, I was wondering if long sequences of winning races were overcoming the large losses but it took maybe a much longer sample size to prove profitability than many people were allowing for.
Imho herein lies the problem, if you approach it from the loss avoidance angle. Because it doesn't really have anything to do with avoiding losses, it's just about managing your position (risk), or it should be at least. If you're countering a trend why expect every time that it's going to turn soon as you enter, when it's more sensible to expect that you may not catch the best possible price the vast majority of time.

Position/risk management shouldn't be underestimated, I have seen enough of Peter's videos by now that I could almost bet my whole bank on a claim that if you open completely random positions on any prerace market and then tell Peter to manage them from there, I'm pretty sure he would still end up in profit most of the time.

And then all this begs the ultimate question, are entries vitally important for every trading approach? I don't think so, for some of my approaches they certainly don't have to be spot on, I may increase stakes tenfold but only if I get a great read on a market and I'm dead certain of something, and for the rest I try to be as flexible as possible, entirely depending on how volatile my market is.
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Derek27
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Morbius wrote:
Tue Oct 13, 2020 2:46 pm
Derek27 wrote:
Tue Oct 13, 2020 12:38 pm
The Silk Run wrote:
Tue Oct 13, 2020 12:16 pm
Welcome Morbious

From my personal perspective I do use Loss Recovery with great success, and long-term. I formulated my own system that is rather aggressive and used in my automation strategies. I think it works for some, and not others. And I think some members will listen to the responsible advice given by the Gambling Commission.

Good luck
Minnie LAI
'Loss recovery' is quite a broad term, but any strategy that involves increasing stakes or placing bets purely and solely because a previous bet lost is mathematically flawed. If such a system makes a profit it's not necessarily the staking plan that works but the strategy itself.

Am I being ignorant Derek because it seems to me to be different in regards to trading because your first "loss" isn't a loss if you don't take it. Many financial traders don't use stop losses and granted these are longer term markets as Peter alluded to in one of his replies. However a second larger entry not only has the ability to erase the previous "loss" but is entering the market at a new "breakeven" in a market that wildly oscillates. But I understand your point in that if such a staking system works then its the strategy and not the system but I do know that such systems work under certain circumstances albeit tiny and was wondering if this applied to horse racing pre-race markets. Or is the market simply behaving in a way that essentially makes such a strategy a "martingale" by default???
There's nothing wrong with chucking in a second trade and doubling up if that was your intention. For example, if you want to lay £100 in a volatile market you might spread the trade along the ladder, throw in a couple of £10s followed by a couple of £20s. What I'm saying is, if you open a trade with the intention of closing for a few ticks profit, the trade goes against you, and you add to that trade purely to recover your losses or move the scratch point without having any real evidence or reasoning that the price will rebound, that's the same as the Martingale. It's also, for traders that suffer or have suffered from loss-aversion, hard to distinguish between a positive position and simply avoiding that red.
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Derek27
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rik wrote:
Tue Oct 13, 2020 2:19 pm
it must be skewed in that way because your winning more if you dont hit the 10 losing sequence in the 1023 bets
if you dont hit it you double up, but if you hit the losing sequence you still have the bets you won before you hit it, say you hit it after 500 wins your only down about half of your initial bank
You just made me realise I'm not sure what the rules for the Martingale are when you're out of funds. Do you quit or throw what's left of your bank until you've recovered the money? :)
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Dallas
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Derek27 wrote:
Tue Oct 13, 2020 5:44 pm
rik wrote:
Tue Oct 13, 2020 2:19 pm
it must be skewed in that way because your winning more if you dont hit the 10 losing sequence in the 1023 bets
if you dont hit it you double up, but if you hit the losing sequence you still have the bets you won before you hit it, say you hit it after 500 wins your only down about half of your initial bank
You just made me realise I'm not sure what the rules for the Martingale are when you're out of funds. Do you quit or throw what's left of your bank until you've recovered the money? :)
Call 0808 8020 133 ;)
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