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Originally Posted by KennyVictor
Hi Chrome,
Over the weeks you've given us the odd formula to calculate if a system is likely to be sustainable. I've written stuff down twice at least and promptly lost it. Could you rehash them for us please.
Cheers,
KV
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Hi Kenny,
This is what I use as a basis to start, (it might be easier to give a practical example of one of my real systems):
Selections: 668
Winners: 326
Strike Rate: 48.80%
Profit: $61.10
POT: 9.15%
Average Dividend: $2.24
Minimum Dividend $1.10
Maximum Dividend $2.90
Stage One
Divide the profit by the
average win dividend giving 27 or 8.28% of the winners - a decent percentage of the winners make up the profit.
Stage Two
Divide the profit by the
maximum win dividend giving 21 or 6.44% of the winners - again acceptable.
Look at the scatter of profit, is it consistent or is it located in one chunk of results, so broken down yearly...
Year 1 +39.60 units
Year 2 -11.20 units
Year 3 + 3.30 units
Year 4 +14.00 units
Year 5 +18.30 units
Year 6 - 8.70 units
Year 7 + 5.80 units (5 months data)
So now we know that there are more winning years than losing years, therefore the system is reasonably stable or consistent. In fact, the large loss in Year 2 is more likely to be a hazard result.
I devised the system in Year 4 (backtested) and kept track of it live since then.
This is the method I use with all my systems, some I just follow on paper if I'm not confident of future viability.
From experience, this method of testing only works on decent chunks of data, you cannot form an opinion reliably on less than 500 races.
Dividing the profit by the average dividend, and then dividing that by the number of winners, the MINIMUM I will accept is 5%.
Dividing the profit by the maximum dividend, and then dividing that by the number of winners, the MINIMUM I will accept is 2.5%.
I am amazed to see systems touted "elsewhere" that just don't hold up.
Factors to recognise a doomed system:
Lack of data - less than 500 races
Profit coming from inconsistent patterns
Profit coming from bolters
Profit coming from a small percentage of the maximum dividend i.e. 1% or less.
Even dividing the profit by the average win dividend looks ********** percentage wise.
Note: sometimes you have to be a little flexible in your assessment depending on the type of system, but you still have to stick to the basic philosophy.
Hope this helps.