Labouchere Rebuttal

General / Jack Houghton / 16 August 2008 / 4 Comments

Jack Houghton was less than impressed with the Reverse Labouchere system championed by another betting.betfair.com columnist during the week. Here's why...

The only plausible explanation is that Wayne Bailey is on holiday. Not wishing to disappoint his public, he asked someone to ghost-write his most recent offering. That must be it. It's the only reason I can come up with that this usually thoughtful and thought-provoking writer could produce something so imbecilic, ill-advised, and downright hazardous: the substitute he picked is a moron.

For those who (luckily) missed the substitutes' submission, it focused on a complex staking system called the Reverse Labouchere. We were treated to an example of how the system works; following its fortunes over the course of 22 bets (selected using a groundbreaking betting system). The result? Well, it was an overwhelming success: showing a clear profit.

That it only began to show a profit after bet number 22 - and that the same selections would have returned more than double the profit if simply backed to level stakes - is glossed over somewhat by the conclusion: "The overall verdict? The jury is still out..."

The Jury might be out, but only because they thought the case so ridiculous they've walked out in disgust.

Staking strategies like Reverse Labouchere (see also Martingale and D'Alembert) exist in a pseudo-rational land somewhere to the west of tarot cards and astrology. That they still generate interest - for reasons other than as historical curiosities - is remarkable and sad in equal measure. But just as there is a market for Russell Grant and Mystic Meg, there too is a market - presumably stoked by casino operators and fixed-odds bookmakers - for those pedalling these ridiculous staking approaches.

As a runner, I'm often struck by the content of running magazines. 80 per cent of the content is irrelevant to 80 per cent of the readership. The stark fact for most runners is this: if you want to improve your performances, read less and run more. And yet the magazines are full of the latest advances in the extremities of athletic performance - compression socks, nasal strips and complex training programmes - that are all but irrelevant to the reader who hasn't got off their arse in three weeks.

The same is true of improving betting performance: too many punters spend too long focusing on the irrelevant minutiae; when they should be looking at form.

For the record, the only staking "system" that makes logical sense is to increase your stakes proportionately to how "wrong" you think the odds are. In other words, if a horse is [11.0], when you think it should be [5.0], you might have £10 on it. But if the same horse were [20.0] you should increase your bet. The most established version of this system is known as the Kelly Criterion; developed by a mathematician called John Kelly in the 1950s. Under analysis it has shown to be an effective way of maximising profit when operated in conjunction with a successful selection strategy.

And therein lies the key. Whilst the Kelly Criterion has been shown to be valid, its validity is predicated by the need to find enough winners whose odds represent value. In other words, it doesn't matter how good your staking system; if you have no accurate way of identifying when the market is right or wrong, you'll lose in the long-run.

For most punters then, improving the ability to create accurate tissue prices, rather than playing around with staking strategies, will be a far more efficient use of time. After all, the Kelly Criterion, in its full form, is an exceptionally complex piece of maths. And if, like me, you define complex maths as remembering your mobile number, you'll do far better to keep things simple.

Having a betting bank, separate from and non-reliant on your day-to-day finances, on which you impose strict depositing rules, is the most obvious first step. Keeping your stakes to a maximum percentage of that bank should come next. The percentage will vary depending on your punting style. If your strike rate is historically high, you might look at five per cent. If lower, perhaps one per cent is more appropriate. And then, as you get more confident in deciding how right or wrong a price might be, you might want to adjust your stake accordingly; in line with something like the Kelly Criterion.

Whatever you do, ignore the false promises of wondrous "staking systems." They're complete bunkum. And beware the charlatans who promulgate their myths. It might be boring, but as with running: punting performance improves with hard work and application.

Luckily, Wayne should be back from holiday soon, and we'll be able to enjoy his good sense in helping us understand where and why certain horseracing trends exist. It's time the substitute was subbed.

[Note for editor: Wayne's article at:
http://betting.betfair.com/horse-racing/betting-strategy/racing-betting-reverse-labouchre-staking-120808.html]

Comments (4)

1. Wayne Bailey | 16 August 2008

   Jack, I'm flattered that you decided to dedicate a whole article to what's wrong with one of mine, but then again, isn't that what we've come to expect from you?
   The man that gave us a book named 'Winning On Betfair For Dummies' never gives us anything of the sort. Instead, he takes apart, piece-by-piece, the articles wrote here by Simon, Graham, me or anyone else - when he can't think of something to write about for himself.
   For the record, I wasn't advocating the staking system.
   I was testing it out, and reporting the results - simple as that. The fact is, people are interested in staking plans whether they are any good or not. As writers, I believe it's our job to discuss, dissect and analyse what Betfair punters are up to - but perhaps you're too aloof for all that discussion. You'd sooner give your thoughts on... well... my thoughts.
   I was merely testing a staking plan out on a PROFITABLE strategy that I posted ages ago. The profitable strategy was one of many that went down well with the readers and hopefully made someone a few quid, as I've certainly made some. Actually.... have you read that article?
   Probably not. Well, here it is:
   http://betting.betfair.com/horse-racing/jockeys/trainer-in-focus-aiden-obrien-060508.html
   Have a read, you may wish to follow. But then again, it's probably too basic for you.
   But wait; isn't Simon's ratings and speed stuff too complicated?
   Stop sitting on the fence Jack. You wrote articles telling us that we should price up races, but never gave any insight as to how to do so. Have you anything to offer the reader other than negativity?
   The only tune you seem to play is that the punter needs to learn to get value. Well, as Popeye would say - Well, blow me down!
   Hardly ground breaking stuff Jack. Can you offer an insight into how to find such value? I think I can. No, I think I have - here on these pages.
   If you bother to read that article, you will see that I advised following O'Brien in four types of races. All four strategies show a decent profit since published. Enough said?
   Obviously it's not enough for some...
   The best you can offer is the Kelly system? That's laughable - it assumes the backer knows how to identify a 'value' bet.

   If the every backer could do that Jack, all of us racing journalists would have our P45 sent long ago.
   I can proudly hold my head up high on this site, and believe I've helped people to 'win on Betfair'.
   Is that something you can say you've done on this site?

   I digress.

   
   It's easy to tell people to search for value, but actually showing them how to find it is another matter.

   Hmm... I'm getting even angrier now that I've spent so much time typing this, so I should probably use my next article to give this tit for tat rubbish the rebuttal it deserves.

2. John Hall | 17 August 2008

   What a load of gibberish

3. Jack Houghton | 17 August 2008

   Phil Conners offers Punxsutawney Phil the following advice in Groundhog Day: "Don't drive angry." It's good advice. If you drive angry, you make bad decisions. Similarly, if you write angry, you make bad arguments. I presume this explains your deranged rant above.

   You make a number of largely ad hominen points, that I will try and address here in turn.

   First, you state that when I can't think of anything else to write, I resort to taking apart articles written by others on betting.betfair. This is the first time I have "taken apart" someone else's article whilst writing on this website. In the past, I have engaged in some gentle rib-tickling, in an effort to spark debate. And on a couple of occasions I have written responses to individual points within others' articles. On all these occasions those victims of the rib-tickling, or those who put up the original points, have responded in kind. The debate, in every case, has been developed and moved on as a result. So respond to me if you will on the points I make about your latest offering, but do not paint me as a serial attacker of others when the facts do not back you up. And don't try and recruit other writers to your cause. You do not speak for them. If they have a problem with something I have written, they are big enough to tell me themselves. The reason I chose to "take apart" your article in this one instance is that I felt it sufficiently ill-thought through and misleading to dedicate a full response to it.

   Second, you say the following: "The fact is, people are interested in staking plans whether they are any good or not. As writers, I believe it's our job to discuss, dissect and analyse what Betfair punters are up to - but perhaps you're too aloof for all that discussion." It's interesting you feel it our job to "dissect" things. Doesn't "dissect" mean "to take apart"? Hang on... isn't that the very crime you just accused me of? Make up your mind Wayne. For the record, I agree with you: it is our job to dissect and discuss things as you suggest. Which is exactly what I did with your article. Given the ridiculous points you put forward in your article, perhaps I should have remained aloof. But I didn't. I got involved and dissected it. The autopsy discovered the subject had died of extreme stupidity.

   Third, you meander on for a long time suggesting I attacked the selection policy itself. If you read the article again, you will see quite clearly that I don't attack the selection strategy, I attack the staking strategy. In fact, I emphasise that if using a different staking strategy, your selections would have returned double the profit.

   Fourth, you say I: "wrote articles telling us that we should price up races, but never gave any insight as to how to do so." This is, again, completely inaccurate. In fact I wrote a whole article on how speed or handicap ratings could be used for that very purpose.

   Fifth, you state the Kelly Criterion is laughable, because: "it assumes the backer knows how to identify a 'value' bet." In my article I make the exact same point: "[the Kelly Criterion] is predicated by the need to find enough winners whose odds represent value. In other words, it doesn't matter how good your staking system; if you have no accurate way of identifying when the market is right or wrong, you'll lose in the long-run." Is it fair to attack me by making an argument that I make myself? If you read the article again Wayne, you will see it is the core thrust of the article. All staking strategies - whether well-thought out ones like Kelly's, or ludicrous ones like Reverse Labouchere - require the punter to identify the right bets to make. And this is where punters should focus their time.

   Sixth, you accuse me of "sitting on the fence." To be clear; I wasn't. I was stating quite clearly that your article was ridiculous. I can't stand any more determinedly on a particular side of the fence than that.

   Seventh, you make various references to my negativity and inability to help readers win on Betfair. I can perhaps concede this point to a degree, but will offer a defense. The editors here have given me a brief that doesn't cover tipping. With good reason. Both Cunningham and Rowlands - and yourself on occasions - are much better qualified to fulfill that role than I. I'm told to concentrate on offering something from left-field, that is hopefully thought-provoking, controversial and, on occasion, funny. You, and readers, may think I fail at this. And that's fine. But it's unfair to judge me on something I am not asked to do; so don't attack me for not providing winning strategies on betting.betfair. That's your job, not mine. On other occasions - like when appearing as a pundit on Betfair Radio - I fulfill a different role; and am happy to be judged on my performance when doing so.

   Lastly Wayne, you seem to think I'm attacking you as a person. This isn't the case. In the main, I think your articles are well researched, well written, and provide a useful alternative foil to the punting strategies put forward my Cunningham and Rowlands.

   However, your latest effort was an abomination. You say you weren't recommending the Reverse Labouchere staking strategy, but at no point did you clearly state this. And the fact you didn't point out that your (successful) selection method would have performed even better with another staking strategy (level stakes) was an omission someone with your analytical approach to horseracing should be ashamed of.

   I attacked your article so strongly for two key reasons: because it was so bad; and because you didn't label the Reverse Labouchere with the Serious Health Warning it deserves.

   If you're upset by that, then I am genuinely sorry. I don't want to hurt anyone's feelings. But at the same time I'd rather hurt your feelings than have a reader go off and follow the Reverse Labouchere to their financial cost. You were keen to tell me what our "job" as writers should be. Well I think I was doing my "job" in this instance.

   I look forward to your rebuttal to my rebuttal. A re-rebuttal if you will.

4. graham cunningham | 19 August 2008

   A good thread