Help Compounding Profits

[Speculator78]

This is probably a stupid question but I'm having difficulty understanding the concept.

Lets say I have a starting bank of €500 and on Day 1 I make €50 how do I compound the profit?

If I'm trading 30 races a day do i compound the profit after each race, each day or each week?

I've heard people say thats its simple to work out with a spreadsheet but my main problem is not being able to work out when I compound.

Any help appreciated
Pat

[Euler]

If you have a £10 stake in the first race and win £1, then you next stake would be £11.

If you win regularly then your profit growth will be exponential if you can re-invest like this.

If you had €500 and win €50 then your next days stake is €550 and so on.

[Speculator78]

Would it be best then do u think to compound like that at the end of each day rather than each race?

[Euler]

You should be more concern about losers. That's what will make you go bust, so your staking plan should focus on your worst losing run and long term expectancy.

This is stock market related but an interesting money management tool: -

http://www.dummies.com/how-to/content/t ... style.html

[OnGoldWires]

If you are making €50 on 30 races you are making about €1.66 per race or 1/3% on your capital.
Compounded after each race you would make an extra €2.50 on day1.
The difference between the two adds up and after 900 races/ 30 days

(1.0033^900) = 19.4
(1.10^30) = 17.4

So the difference would be twice your capital. However, I would suggest that most people would be happy with 17 times there original stake. The hard part is winning steadily enough to make these calculations meaningful. If you can win 10% of your stake each day then staking is trivial.

I would compound daily, because I think worrying about your staking will distract you from your strategy.

You "compound" your winnings by staking a fixed percentage of your balance and if this percentage is greater than 10% then as Euler points out adjusting your stake for a 100% loss of stake is more important than winning an extra couple of pennies after a win.

Good luck.

[gazuty]

Also consider http://en.wikipedia.org/wiki/Kelly_criterion

[Speculator78]

Thanks very much for all your replies.

My stakes aren't fixed, they change depending on the odds of the runner I'm trading so I think compounding at the end of each day is probably the way forward for me.

Thanks again, some very interesting stuff to take on board.

Pat