Dealing With Variance (AKA – Luck!)

I talked in my last post about value, if you missed it then join my Facebook group, I post lots of information there are about low risk gambling, matched betting (no risk gambling)  and the results of my personally filtered “internet schemes that work”

Today I’m going to talk about variance.

A while ago, say a couple of years at the time of writing, my brother called me to tell me that he had lost £50 on a roulette spin. He doesn’t gamble but when the roulette table hit 5 reds in a row he just had to gamble on black, in his words, “There’s no way you would expect red to hit again after 5 of them in row. Bloody red again, 6 in a row Lee, 6!”

I tried to explain that it is irrelevant what has gone before, each spin has the same probability every single time, “yeah Lee I know that, but you know, 5 reds Lee, I had to bet on black”.

It’s human nature to find patterns, it’s how our brains work and is the core reason that people think they are on a winning streak, “I’m winning now, I’m on a streak”.

The truth is that people do have winning streaks but they also have losing streaks. They are completely random, you could say it is blind luck. When people try to anticipate a winning streak they are making a big mistake. Their brains are trying to find patterns where there are none and is one of the components of addiction.

The winning streak and losing streak ratio is called variance. Every game has variance, the number of bets you can expect to hit or miss in a row. It’s more obvious in table games but applies to all betting and especially slot machines.

Take the example of a horse racing betting scheme. Let’s say the best tipster in the world can hit a 30% hit rate, so out of every 100 tips the tipster will hit 30 wins. That is a phenomenal hit rate and anyone that can do that will be shouting it from the rooftops.

Along comes John Smith, the punter, and signs up to that tipster’s service. He places 70 bets at £10 and doesn’t get a single win.  He declares it a scam and leaves the scheme leaving some choice words on his favourite social media platform.

Can you spot his error? The tipster may very well have 70 misses in a row but still hit his 30 in a hundred target.

That’s why variance is so important. You have to realise that you are playing for the long term. Signing up to any scheme for short term gain is pointless because you will probably be starting your journey right in the middle of some negative variance.

You have to find a scheme that shows result over the long term and be able to ride out the negative variance. There are a few methods to ease the pain but it is a pain that all professional gamblers have all the time, but they don’t worry about it, they manage it.

There is a chance that the particular tactic or advantage you have to get value has stopped working so you need to monitor your gambling schemes carefully and stick to a plan, leaving the scheme when you have hit your own personal risk limits. But you should be aware of that before you get into the scheme and have taken account of any loss before you even started.

It’s a bit like investing in a business because like I said last time, it is a business. Businesses invest money all the time and lose it. Not every product they make works, but they plan ahead and know exactly when they will get out, the parent company rarely goes bust because of a single bad investment (though it can happen).

Before starting a scheme check out the previous results and see what the winning and losing variance streaks are. You can never be sure it will remain the same and you have to take a risk, this is gambling after all, but you are taking an educated risk and the variance is unlikely to be different over the next 6 months compared to the last 2 years.

Create a separate betting pot for each scheme, in my experience £500 is about the minimum but for some, realistically it is £1000. Be prepared to lose that pot so you power your way through the negative variance without worrying. It’s very unlikely that you will bust out in the long term but you have to be prepared for it.

Create a portfolio of schemes so when you hit negative variance in one scheme you have much more chance of being in positive variance in one or more of the others, enabling you to ride the storm of negative variance.

Keep your cool when joining any new scheme and you will likely come out on top.