http://home.iprimus.com.au/jfc2000/drawdown.htm

The above site is very useful & I wouldn't mind getting a handle on the calculations behind it, anyone got any clues?

stugots, happy to discuss the calculations behind it, if you look at the source you can see the equations used so can work out how they have arrived at certain answers.

Essentially it generates a random number and uses that to 'simulate' the next string of bets based on the odds and probability of winning that you put in.

My understanding of this calculator is the following:

You could have data on 200 bets you've placed, you place the strike rate %, avg odds and 200 in that calculator and hit simulate drawdown.

This will then give you a random indication as to what the next 200 bets may be. If you record say 25 simulations, then that would give you an average expected profit, drawdown and longest run of outs for the next 200 bets as well as a max and min range.

Thats only my understanding of how it works based on quickly putting in some fake numbers, hitting simulate a few times and checking the source code. I've coded up a few websites and financial calculators in my time using php before so can follow the equations a little.

However if i'm incorrect would love someone to set me straight so i'm not looking at it in the wrong way.

Cheers evajb, had a look at the source coding but is all gobblygook to me.

One thing I was wondering is re the average odds - I assume that would be for the winning selections, not the average odds for the entire sample.

correct stugots as the calculations only need your winning odds, obviously losing bets are simply -1 units per losing bet.

This kind of calculator would definitely come in handy if you had a system that you wanted to understand that potential for moving forward.

I think (correct me if i'm wrong) this form of random number generation to simulate the potential outcomes is known as monte carlo simulation?

I'd say if you had a system with say 500 bets that was profitable so far and you ran this simulation 50 times, recorded all the profit, drawdown and losing streak figures and worked out the min, max and mode it would give you a pretty good basis for how volatile your system is and its potential moving forward

Excellent Stugouts .
Thank you.

Not wanting to rain on anyone's good ideas but IMO the idea of (Monte Carlo simulations) being applied to horse racing assumes normal distributions and correlation coefficients of zero. In my mind this is not typical of race betting markets. The problem with using this approach to calculate probable future mathematical outcomes is that risk assumes that you have an understanding of the future outcomes which are the underlying inputs of any Monte Carlo simulation. Probably waffling now in terms of jargon but the bottom line is that the distribution of betting market returns are often not within the so the called normal range.

IMO and in my own application, a better way top quantify the likely range of potential outcomes in horse racing is to build a model (which we have done) that relies on standard deviation as the basis to measure how spread out the numbers are. The formula is simply the Square Root of the Variance. Variance is the average of the squared differences from the mean (its important to square the differences as if you just added them the negatives would cancel the positives).

Once you do the above you can then simulate your results over 1 or 2 lines of deviation which will tell you just how far your future results can and will vary. 1 line will tell you your results 68% of the time whilst 2 will cover them 95% of the time. That way you can learn the full range of probable outcomes both in terms of POT and actual real dollars profit/loss.

If anyone would like me to run a simulation for them and send them the results them I'm more than happy to oblige. All I need is long term strike rate, expected number of bets over the period, assumed profit edge and risk threshold (the % of your bank that you are willing to lose and continue betting without change) both in terms of a percentage.

__________________
Regards


Paul Daily - Ratings2Win Pty Ltd (Director)
R2W Axis - Axis is Australia's leading horse racing software and database; with sophisticated form analysis tools and accurate performance ratings that include Hong Kong.
http://www.ratings2win.com.au/

Hi Paul,
What would the Minimum number of bets needed to take you up on your offer (to get any reasonable conclusion.)?

Cheers

Hi darky

The number itself is not really relevant as the smaller it is the larger the variance. Obviously the bigger the sample size the more it regresses to the mean.

__________________
Regards


Paul Daily - Ratings2Win Pty Ltd (Director)
R2W Axis - Axis is Australia's leading horse racing software and database; with sophisticated form analysis tools and accurate performance ratings that include Hong Kong.
http://www.ratings2win.com.au/

Very true Paul, I recently ended a Lay system that went for 2,711 races, had 749 selections for 1 accident and a profit of 6 points. Thought I had one for the Coca Cola vault....lol

Then in the next 241 races, 87 selections, I had 4 accidents.

In other words my win strike rate went from 99.866% to 95.4% in a matter of days. I would defy any mathematical model to predict that outcome! The system might then have gone on for another 1000 selections and had no accidents. This is the very nature of the beast, we grapple with every betting day?

RP