Compounding

[Daniel]

When starting with a new system / service for the first time you may be cautious about investing a lot of money into it. You may only want to use a small amount of money as your initial betting bank. This in my opinion is the best way to get to grips with a system or service before you decide whether or not to invest more.

But is there any need to invest more??

You don’t necessarily have to put any more of your own money into your betting bank. If a system / service has proved to make consistent profits, you could easily boost your betting capital by compounding your stakes.

This is a simple strategy and it involves you reinvesting all or part of your profit into your betting bank and then recalculating your stake. This can be done each day, week or month. The frequency that you do this largely depends on the regularity of the profits from the system / service. If you are following a system / service that has long losing runs followed by big winners, then a longer period of time would be better suited. If you are making moderate consistent profit, a shorter period of time would work best.

There are two ways of compounding:

1 – You increase your stake after a profitable period and reduce during a loss period. You would stake a % of your bank each bet and your stake would increase / decrease in line with your bank.

2 – You only ever increase and never decrease your stakes. This is a more aggressive staking plan but if the system / service is profitable, it will provide you with greater rewards. When on a losing run your stakes would remain the same until your bank has increased back to the level it was at before the losing run occurred.

Using the first 20 days that we have been running our service live, you would have made an increase to your bank of 41.28%. If compounding each day using method 2, you could have increased that amount to 48.69%.

Now 7.41% may not seem like a great deal but considering this is over a short period of just 3 weeks it becomes a lot more attractive.

If the performance were to continue at this level, the next 3 weeks would make a much bigger difference. Over the 6 week period the level staking increase would be a very respectable 82.57% but compounding would make a huge increase of 121.10%.

You can now see the power of compounding. A small difference of 7.41% over 3 weeks has increased to a massive 38.53% over the same period again.

In a short period of time you could easily turn a small initial bank into a large one.

I have attached a spreadsheet that you may download to better explain the above example.


  Compounding.xls (Size: 55 KB / Downloads: 3)