Applying the Law of Large Numbers to Horse Racing
As Witnessed by Our 49/1 Betfair SP Winner Yesterday
I recently published a post titled Building a Long-Term Edge.
One of the key points outlined in the post was The Law of Large Numbers.
The Law of Large Numbers
Repetition is Key: The video emphasises that to allow your edge to manifest, you must engage in a large number of bets. Just as the casino relies on thousands of bets over time to turn a profit, you need to place enough bets to see your edge play out.
Overcoming Short-Term Variability: Short-term losses are inevitable, but consistently betting with an edge will generate profits over a larger sample size, similar to how a casino operates.
To truly allow your edge in horse racing to manifest, it’s essential to engage in a significant number of bets over an extended period. Daily action and individual bets can often feel like noise, masking the underlying performance of your strategy. Just as a casino relies on thousands of bets over time to generate profit, you need to consistently place enough bets over days, weeks, or even months to see your edge materialise.
Short-term losses are an inevitable aspect of betting. Individual results can be erratic and misleading, creating the illusion that your edge isn’t working. However, by betting consistently with a well-defined edge, you can overcome these fluctuations. Ultimately, your strategy will yield profits when evaluated over a larger sample size, similar to how a casino focuses on overall performance rather than individual games. This long-term perspective is crucial for realising the true value of your betting edge.
All of this ties in perfectly with what occurred yesterday regarding our main MULTI-SYS sheet. Yesterday our main sheet found an excellent winner at 28/1 SP, or even better, 49/1 BSP.
This success propelled our main MULTI-SYS sheet to an all-time high after 46 days of dedicated effort, during which we encountered a challenging drawdown of 96.75 points. In total, achieving this new high required 517 bets placed between 24/08/2024 and 09/10/2024.
Patience is essential in any form of investing and speculating. For instance, gold has reached several record highs this year, yet it took nearly nine years (from 2011 to 2020) for it to reach its next all-time high. After breaking through in 2020, it waited nearly another four years to set new records this year. Meanwhile, silver is still striving to surpass its previous peak from 2011, remaining stuck underneath that level for over 13 years. While the past 46 days have tested our resolve, consider the patience required for gold and silver investors!
I have previously explored such theme in these posts:
Our 3-rule and 4-rule methods didn’t experience the lengthy 46-day wait to achieve new all-time highs, and they also experienced significantly reduced drawdown compared to backing every single MULTI-SYS selection on the main sheet. Typically, the 3-rule method avoids long gaps between new highs, though there was one notable stretch this year, which you can see here:
There was a nearly three-month wait from the end of March to June before we achieved our next high.
The 49/1 winner yesterday was not identified by either the 3-rule or 4-rule methods. This was due to Tommytwohoots competing in a race with three qualifiers. The 3-rule and 4-rule methods disregard any race with more than one qualifier.
ESSENTIAL INSIGHTS: Applying the Law of Large Numbers to Our Recent Ups and Downs
The law of large numbers states that as the size of a sample increases, its mean (average) will get closer to the expected value. In the context of our recent ups and downs with the MULTI-SYS sheet, this principle suggests that while we may experience fluctuations in performance in the short term, over a larger number of bets, we should see our results stabilise and reflect our true potential.
Understanding Variability: Our recent experiences, including the highs of a 49/1 winner and the lows of consecutive losses, highlight the variability inherent in betting systems. Initially, we might feel disheartened by a streak of losses, but the law of large numbers reassures us that these results are part of the natural ebb and flow of betting. The more bets we place, the more we can expect our overall results to align with our long-term expectations.
Long-Term Perspective: It's important to maintain a long-term perspective. Our journey over the past 46 days, culminating in a new all-time high after overcoming a significant drawdown, exemplifies this. Each bet contributes to our overall average, and while individual results may vary, the aggregate performance should reflect our system's effectiveness over time.
Patience in Performance: Just as investors wait for the stock market to reflect its true value, we must exercise patience with our betting methods. Historical performance may show that significant gains follow periods of drawdown, aligning with the law of large numbers. As we continue to place bets, we can expect our results to stabilise and improve, validating the strategies we employ.
Embracing the Ups and Downs: Finally, understanding that ups and downs are part of the process allows us to embrace them rather than fear them. Recognising that we’re playing a long game can help us stay grounded during the inevitable downturns and motivate us to continue refining our strategies for future success.
In conclusion, by applying the law of large numbers to our recent experiences, we can better appreciate the importance of consistency and patience in achieving our long-term betting goals. The ups and downs we encounter are not just challenges; they are essential components of the journey that will ultimately lead us to success.
