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Track Tracts

Money Management:
Winning the Handicapping Game with Sessions
by Gordon Pine

For most horseplayers, their "bankroll" is whatever they have in their pocket. You know you're talking to serious handicappers if they've taken a certain sum and set it aside as their horse wagering bankroll.

I've always bet with a separate wagering bankroll. For years, I've played a percentage of my bankroll based on my historical edge, usually calculated (by quickly looking at my records) before each race day.

Often, when I'm trying out or tweaking a new method, I will use my mini-bankroll method, which basically involves starting with a minuscule amount but applying a Full-Kelly percentage. It combines the advantage of an insignificant worse-case scenario (losing a $40 bankroll) with a great best-case scenario (a positive-expectation strategy balloons a bankroll really quickly because the bet size is so bold, yet still within mathematical reason).

"Most games have a defined beginning and end where you either win or lose. However, the horse race wagerer's game either never ends or ends badly, with the destruction of his bankroll."

But recently I've been tweaking my money-management strategies a bit. This is partly due to talking to other players, and partly due to a couple of things I've been reading. In his interesting booklet Horse Market Investing, David Schwartz introduced me to the "session concept." He points out that most games have a defined beginning and end where you either win or lose. However, the horse race wagerer's game either never ends or ends badly, with the destruction of his bankroll. Without a defined end to the game, the best a handicapper can do is maintain and build his bankroll, sometimes drawing out money for personal use. But if there's no end to the game, how can a player really win?

Schwartz' sessions are defined by a goal, such as doubling or tripling your bankroll. If you reach that goal, you've won the session, and you reward yourself by withdrawing a portion of the profits and starting a new session. Aside from the practicality of this approach � it sets up a method for paying yourself � it's psychologically sound. Handicapping is tough on the psyche for lots of reasons. For instance, you almost always lose more events (races) than you win, and that takes its toll. And handicappers aren't exactly placed on a social pedestal as devotees of an honored pastime, despite the fact that chess is easy in comparison. It's a good ego-boost to set a financial goal at the track and then meet it. (Note: Horse Market Investing is about a lot more than the session concept. You can contact David Schwartz at regarding his work.)

Steve Fierro tweaks the session concept in The Four Quarters of Horse Investing by using a time period rather than bankroll growth to define his session. I like this idea, because I like the concept of regular paydays if you've earned them. As Fierro says, "I have chosen to use calendar months as my sessions. My game ends every month. A losing month is simple, no payday... Following a losing month I must get back to the original bankroll amount and surpass it by a required dollar amount. I then pay myself. My paycheck for the month is the amount I have won above the original bankroll for that month... You got it, just like any normal businessman would do."

As an inveterate tweaker myself, here is what I plan to do. Like Steve, after each winning month, I will take a payday. Since I'd like to build my bankroll, I'll take half of any profits above the original bankroll, after making up for any losses that might have occurred in the previous months. Then I'll add this tweak, suggested by handicapper Jim Oddo. If my bankroll doubles during a month, another rule goes into effect: If I then lose 30% of my profits from my doubled bankroll, I will take all my profits for the month so far and restart at my original bankroll size and bet size. I know from personal experience that this would have mitigated my historical tendency to quickly run up a bankroll and then give a lot of it back.

If your bankroll is whatever's in your wallet and your financial plan consists of trying not to hit the ATM more than once per trip to the track, then you might consider mapping out a money-management method for yourself. Consider adding session-concept guidelines that give you the opportunity to periodically take profits and win the game you're playing.

Copyright �2003 by NetCapper Inc.  All rights reserved.

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