Friday, 25 May 2012

System 8 Review

The theme for this review is probably around how difficult it can be to set a betting bank for a system if it has a one-off maximum drawdown historically and is reducing in bet number over time. Would be good to get any reader's thoughts on the question I pose at the end. :)

System 8

Without a doubt, system 8 will always be one of my favourite systems. It’s funny, I liked 6 as it was the first I built, I didn’t care for system 7 much and system 8 is definitely one of my favourite systems! I think the thing with system 8 is that when I developed it, it was so much better than 6 and 7, it was the first system where I thought to myself that returns of 20%+ were possible on football systems.

Obviously, hindsight has shown that system 8 can’t get anywhere near the backtested results and therefore, for system 8, it will never achieve a 20% ROI in a live environment but I think part of my likeness for 8 comes from the start it had when it first went live.  The first 90 bets produced a profit of 25%+ and I seriously thought I’d cracked this footie malarkey with this system, never mind the combined systems! 4 seasons of backtested results with 25% ROI, a first half season live with the same ROI. Does it get any better?

Well, the answer was no really and it went massively off the rails in the second half of the first season and the 25% ROI was only 9% at the end of the season. Given I’d doubled stakes on this system at Christmas, it was a bloody costly lesson in what variable staking can do on a profitable system and I was still licking my wounds last Summer when I was doing all the system reviews then!

This season has been a funny one for system 8. It hit 1 winner in the first 16 bets this season and basically, I wrote this system off I’m honest. Combined with the run at the end of the first season, the system had dropped 25pts profit in one fell swoop (48 bets) and it actually crossed my mind that I had been fooled into believing that this system had an edge.

Of course, it then went on a remarkable run this season and finished the season with 24pts profit from the last 76 bets. The live graph is really interesting and again, I really think it shows how variance can impact a system with a significant edge.

24pts profit after 125 bets, no profit after 175 bets, 24pts profit after 254 bets!

I guess at the end of the day, the system made an ROI last season of 9% and this season, it has made an ROI of 10.2%. Hence, it has improved upon last season but it doesn’t exactly have the smooth P&L it had during backtesting!

I guess if I look at the fact system 8 is a filter on the system 7 bets, then it hasn’t worked this season. An 11.4% ROI on system 7 has become 10.2% on system 8, so in that sense, the system hasn’t had a great season.

It does feel a bit tough to knock a system with a 9.5% ROI over the first two seasons of its existence but it’s a cruel game at times this tipping game! If you look at the last 22 months, it has only suffered 3 losing months, so again, I’m probably being a little harsh on this system.  15 out of 18 winning months since it went live and it’s a great record for a single system.

Barely any profit on Aways this season and a 20% ROI on Homes tells the story well and quite simply, it has had a poor season on Away bets. This is backed up by the fact covering the draw was even worse on the Aways, so it’s not like the selections were drawing. They were losing!

League One Aways and Championship Aways only saw 3 wins from 22 bets and ultimately, when you think about this, it’s remarkable the system had a winning season, never mind a 10.2% ROI this season!

Of course, similar to system 7, the legacy with this system is going to be the fact it hit 3 losing months out of 5, resulting in a fairly large drawdown and if you believe maximum drawdown to be an indicator of the future betting bank, this system is stuffed long-term!

I suggested a betting bank last Summer of 40pts based on a max drawdown of only 15pts (seemed a very safe bank!) and when you consider the system only made a profit of 9.6pts this season, it’s a very low ROC at 24%.

Now, this is a subtle point but the system had much fewer bets this season 94 compared to 160 last season and this has to be reflected in the betting bank somehow.  Considering the betting bank is set for the season, then you need to factor in the bet number expected or you’d never get an ROC that looks decent going forward.  The tweaks I made last Summer means we’ll probably get 100 bets a season on system 8 and therefore, past drawdowns are maybe not the best guide although bear in mind drawdown isn’t linked to bet number but average odds, so it’s not easy to come up with a bank for this system going forward.

The new max drawdown is 24pts and therefore, if we say 50pts for a bank when it only has 100 bets a season, we’re talking rubbish. It would need to achieve a 50% ROI to achieve a 50% ROC which sounds a bit too difficult for a footie system!

I suspect that if contemplating following system 8, you need to sort of ignore the drawdown that occurred and buy into the fact it has only had 3 losing months in 22 months. Obviously, if the 3 losing months come again (you’d probably need 5 now with the lower bet number) in a row, you’ll blow a bank but I reckon it was pretty unlucky that 3 big losing months came in 5 months. It has had 9 losing months in 54 months, so to hit 5 losing months close together now would be very unfortunate and hey, if it happens, maybe losing the betting bank is what is meant to happen!

Sticking my neck on the line, I’d say a betting bank of 30pts should be OK for this system next season. A target of 10% ROI across 100 bets would give an ROC of 33% which is about where you want to be with this system.

I can see quite quickly that setting banks based on max drawdown isn’t an ideal way to do it. If that max drawdown is a one in 20 season event (like I believe this one is), then doubling the drawdown to get a betting bank means you are probably covering yourself for a one in 200 season event! Not sure what a 200/1 shot looks like on a system like this but with average odds of 2, it would maybe mean hitting 25 winners, 75 losers over 100 bets. Considering it has made a profit every year, it’s a big swing to go from 10% ROI to an ROI of -50%! Hence, I just think setting a bank needs to cover you for a bad season, not for Armageddon happening but again, people have their own view on betting banks. 

Anyone have a view to share on what sort of bank system 8 would need going forward based on the ROI, bet number and results to date?

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