Loss Recovery Systems

Don't chase your losses, it doesn't work. You will eventually bust your bank.
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Morbius
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Firstly I would just like to say a big hello to all the people on the forum as this is my first post but I have been a lurker for a few years and clearly there are some very smart people around here who I hope to learn from.

So here I go then with something that has been troubling me for a while and this is to do with Loss Recovery Systems. Now before anyone sighs and raises their eyebrows at my stupidity/naivety (delete as appropriate) :D it does very much seem to even a struggling trader like me that these systems are very seductive in their lure and are nothing more than Martingales in disguise (however intricate they sometimes may be).

However there is something that is gnawing on my brain that my limited understanding cannot get my head around, hence me asking for help. Do they or do they not stand a better chance of working in horseracing markets simply because many backers are potential future layers and vice versa meaning that if you were to initially back for example and the price moved against you, a second larger entry at a better price isn't the same as a martingale on say roulette where we are essentially dealing with independent events because in horseracing there is more chance of the price retracing because of numerous factors that wouldn't apply to a game like roulette.

Or am I missing something important here regarding the dynamics of horseracing markets and that prices may steam/drift far more powerfully than I originally imagined and therefore it is closer to a martingale strategy than what seems apparent. I hope all that sounded sensible and I didn't waffle too much and lost the thread. I know what's in my head but just hope I have phrased it correctly. I really hope Peter could comment although I know this has been discussed before on this forum as I have read the thread but I don't think my question was answered (or maybe it was and I missed it). Anyway, a big thanks in advance to anyone who could help me see further than I already am.
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Euler
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Reading through this you seem to be not talking about loss recovery systems as such, but recovering a losing trade in a time-limited market?
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Kai
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I think OP is talking about "averaging" and not loss recovery systems. Welcome to the forum btw :)
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Euler
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Kai wrote:
Mon Oct 12, 2020 9:05 pm
I think OP is talking about "averaging" and not loss recovery systems. Welcome to the forum btw :)
Y, that's how I sort of saw it but wanted to frame it in a way the first post indicated.
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Derek27
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Morbius wrote:
Mon Oct 12, 2020 7:39 pm
Firstly I would just like to say a big hello to all the people on the forum as this is my first post but I have been a lurker for a few years and clearly there are some very smart people around here who I hope to learn from.

So here I go then with something that has been troubling me for a while and this is to do with Loss Recovery Systems. Now before anyone sighs and raises their eyebrows at my stupidity/naivety (delete as appropriate) :D it does very much seem to even a struggling trader like me that these systems are very seductive in their lure and are nothing more than Martingales in disguise (however intricate they sometimes may be).

However there is something that is gnawing on my brain that my limited understanding cannot get my head around, hence me asking for help. Do they or do they not stand a better chance of working in horseracing markets simply because many backers are potential future layers and vice versa meaning that if you were to initially back for example and the price moved against you, a second larger entry at a better price isn't the same as a martingale on say roulette where we are essentially dealing with independent events because in horseracing there is more chance of the price retracing because of numerous factors that wouldn't apply to a game like roulette.

Or am I missing something important here regarding the dynamics of horseracing markets and that prices may steam/drift far more powerfully than I originally imagined and therefore it is closer to a martingale strategy than what seems apparent. I hope all that sounded sensible and I didn't waffle too much and lost the thread. I know what's in my head but just hope I have phrased it correctly. I really hope Peter could comment although I know this has been discussed before on this forum as I have read the thread but I don't think my question was answered (or maybe it was and I missed it). Anyway, a big thanks in advance to anyone who could help me see further than I already am.
Welcome to the forum Morbius. When I first started trading I remember a market going 15+ ticks against me and I thought, it's gone too far, can't go any further, it must come back eventually, and had a bigger trade on it, I think even a third trade. End result - wiped out a large chunk of my bank! Just like a roulette Martingale there's no limit to how far a steam or drift can go and no limit to how much you can lose.
weemac
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I've lost fortunes doubling up. It feels like it should work but it just doesn't.
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Morbius
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Euler wrote:
Mon Oct 12, 2020 9:03 pm
Reading through this you seem to be not talking about loss recovery systems as such, but recovering a losing trade in a time-limited market?

Thanks Peter, I have just re-read your post again on "Loss Recovery Systems" and I must say that the time sensitivity does a play a big part in these pre-off horseracing markets and is what makes it totally different from most financial markets I guess.
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Morbius
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Kai wrote:
Mon Oct 12, 2020 9:05 pm
I think OP is talking about "averaging" and not loss recovery systems. Welcome to the forum btw :)
Thanks Kai, I am starting to see now just how friendly and helpful forum members can be and I didn't expect so many replies in such a short space of time. Yes you are right, I was trying to average a better price Kai and was getting into bother tying myself in knots trying to do something complex and what I thought to be intelligent when in actual fact it was dumb but you live and learn. What was troubling me was if I was somehow doing the process wrong
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Morbius
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Derek27 wrote:
Mon Oct 12, 2020 9:30 pm
Morbius wrote:
Mon Oct 12, 2020 7:39 pm
Firstly I would just like to say a big hello to all the people on the forum as this is my first post but I have been a lurker for a few years and clearly there are some very smart people around here who I hope to learn from.

So here I go then with something that has been troubling me for a while and this is to do with Loss Recovery Systems. Now before anyone sighs and raises their eyebrows at my stupidity/naivety (delete as appropriate) :D it does very much seem to even a struggling trader like me that these systems are very seductive in their lure and are nothing more than Martingales in disguise (however intricate they sometimes may be).

However there is something that is gnawing on my brain that my limited understanding cannot get my head around, hence me asking for help. Do they or do they not stand a better chance of working in horseracing markets simply because many backers are potential future layers and vice versa meaning that if you were to initially back for example and the price moved against you, a second larger entry at a better price isn't the same as a martingale on say roulette where we are essentially dealing with independent events because in horseracing there is more chance of the price retracing because of numerous factors that wouldn't apply to a game like roulette.

Or am I missing something important here regarding the dynamics of horseracing markets and that prices may steam/drift far more powerfully than I originally imagined and therefore it is closer to a martingale strategy than what seems apparent. I hope all that sounded sensible and I didn't waffle too much and lost the thread. I know what's in my head but just hope I have phrased it correctly. I really hope Peter could comment although I know this has been discussed before on this forum as I have read the thread but I don't think my question was answered (or maybe it was and I missed it). Anyway, a big thanks in advance to anyone who could help me see further than I already am.
Welcome to the forum Morbius. When I first started trading I remember a market going 15+ ticks against me and I thought, it's gone too far, can't go any further, it must come back eventually, and had a bigger trade on it, I think even a third trade. End result - wiped out a large chunk of my bank! Just like a roulette Martingale there's no limit to how far a steam or drift can go and no limit to how much you can lose.

Thanks Derek, I am slowly starting to comprehend this now and how much faster (if that's the right word) a horseracing market is compared to financial currency markets. But I do think this volatility is something to be cherished rather than feared if I can get my head around it
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Morbius
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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
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wearthefoxhat
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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
You've covered most of the key points.

A martingale staking plan/system will win..a lot of the time, enough times for someone to think it's the holy grail and good times ahead. Many university students have started on this journey of discovery, and found this to be the case...but...

intMG.jpg

It is only with unbounded wealth, bets and time that it could be argued that the martingale becomes a winning strategy.


Assuming the odds of were Evens at all times...(not accounting for the 2.7% house edge)

losingseq.jpg

I was a croupier for a time and there were many occassions the results board on roulette red or black, would show an uninterrupted sequence of reds or blacks, up to 20 in a row! So variance does exist, it has to, within the maths.

Okay, so what if you were finding value, an edge, on a selection process. ie: 6/4 about an Evs money chance. Obviously the chances are better overall, but your comfort zone for loss recovery would still be tested to the max.
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Xeres
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I created a loss recovery stystem once, it was based on something very simple, although mine was based on win bets rather than trading.

Each bet would essentially be stake + (cumulative loss / (odds - 1)). In back testing it worked really well and made a ton of money, but in reality it needed a very high bank roll and a lot of effort to make it work.

I sacked it off when I was stuck in a meeting and forgot to top up my account (the stake needed was £500) so the bet didn't go through, of course the horse won so I didn't recover any of my losses.

I would avoid them unless you really understand the system and have a lot of money to support it. I would advise doing lots of simulations on anything to get an idea of what could happen.
rik
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you think in general it must be more likely that an odds move will turn around than keep going?
in some situations it will be, others not
easiest way to figure out if you can predict the turnaround more often than not is using level stakes
any wild differences in stakes will add variance and its harder to figure out if you were right more often than not or just lucky that more of the bigger stakes won
if you had a consistent edge any sort of increasing stakes to recover system is rubbish both in terms of profit optimization as you have to start with a very small amount compared to your capital / what the market can take as well as still mathematically having a bigger risk of losing your max stake than if you were staking level or staking based on edge rather than net
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Derek27
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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
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Derek27
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Xeres wrote:
Tue Oct 13, 2020 10:26 am
I would avoid them unless you really understand the system and have a lot of money to support it. I would advise doing lots of simulations on anything to get an idea of what could happen.
If you've got enough money to support it, forget betting, move to your dream location, buy your dream home and retire. :)
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