Last week I discussed having realistic expectations in terms of profit and profit on turnover.

Today I want to emphasise the fact that you will have losing runs.

Probability has an effect on all things in daily life. Even the best judges should expect and will experience losing runs over any reasonable length of time.

To be a proficient punter it is essential that you can calculate the chance each runner has of winning and then betting only when you receive odds equal to or greater than the calculated chance. However unlike casino games where the odds can be calculated exactly, the odds or percentage chance of a horse winning is not exact or objective and that is why methodical data and ratings need to be kept and adjusted on a daily and weekly basis.

There are a number of factors involved in analysing the form and the subjective nature of this analysis means that opinions are often quite different. But the principle doesn't ever change and that is if you don't do markets how can you possibly know the winning chance of each horse? Furthermore, backing horses (even winners) at 'unders' will see you lose in the long term - that is a certainty.

A simple but pertinent example is a coin toss. Since the true odds of a head or tail is $2.00, this means it is certain that if you take less than $2.00 you will lose in the long term. If you take odds of exactly $2.00 you will break-even. If you are offered say $2.20 and you accept that as a bet (as you should) you will win 10% on turnover long term.

Although you are getting value by getting $2.20, you might still lose 10, 15 or even 20 times in a row. So despite the fact that you have bet sensibly and are getting value, you can still be losing in the short term and this is due to variance and probability. However over time if you consistently repeat the bet you will become a long-term winner.

Now, unfortunately the scenario most punters put themselves in is the opposite of the $2.20 example above. Instead they accept $2.00 or less and don't understand how market percentages, probability and variance all work. The very best (and probably highly optimistic) result for this type of punter long term is that he breaks even. A much more likely scenario for this style of punter is that they are headed for the poorhouse. Why? Because they accept a price that is less than the true odds of that horse. And when they are in front, they double up their bets. When they are behind, they double up or possibly halve their bet. When they have a few beers they quadruple their bet. When their mate knows the owner or the jockey they have ten times their normal bet.

Short-term some will experience the occasional big win and many will experience big losses. But an undeniable fact is that long-term every single one of these punters will lose.

This series will continue in coming weeks with the following topics:
(3) Probability will affect your bank
(4) Understanding market percentages
(5) Discipline is the key
(6) Betting with ratings