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Betting Bank Scalping
This is just a quick article to let you know about a spreadsheet I uploaded to the site today.
It deals with an issue termed betting bank management issue called Bank Scalping.
In essence the idea of bank scalping is to extract and squirrel away from your bank some of the profits made.
A full time pro for example can't live of thin air..he needs cash flow for daily life.
A never touched betting bank that grows upwards into eternity is all well and fine in theory but what's he going to live on?
Similarly if you have your betting bank as a luxury in addition to your day job..would it not be prudent
to at times lock away some of the profits made..especially if there is a freakish good run?
I was inspired to look at this after noting a few things.
Recently when looking at a managed stock market fund I noted how the operators charged clients who invest.
This one in particular examined the value of the fund at the end of each month.
If the value exceeded a past high..they charged 20% of the net gain as a fee.
eg say the initial past high was £10,000 but at the end of month X it had risen to £12,000
they would take 20% of the £2,000 gain over past high as their fee.
Setting money aside to your own bank account is obviously a huge step up on paying it to a manager as a fee.
Additionally I noted that with the nh portfolio selections a rolling bank approach produced some amazing past highs..only for it to drop again of late.
Just looking at the selections since Dec 2006 for example ( the live monitored period )
if you had started with £1000 and bet 5% on each selection at SP ( the £ figure associated with 5% stake rises and falls after every bet )
Guess what the high point of that bank would have been?
Almost £30,000 is the answer.
If you had bet very aggressively at 10% of bank the peak would have hit almost £60,000 !
With aggressive compounded staking however cash can disappear as quickly as it arises.
I asked myself could some form of scalping be done to try and save cash in a side pot.
Would that be an aid in protecting gains made?
I set myself up a spreadsheets to examine such a thing.
It uses the real life data of the nh portfolio since Dec 2006 till May 2008
The spreadsheet looks at two scalping scenarios
Scenario 1 - at the end of each month it checks to see if the end of month total is bigger than historical end of month figures..if so it pockets a percentage to the side pot.
Scenario 2 - similar except it does the calc daily caring not about end of month totals.
The spreadsheet lets you enter figures for
A - the rolling bank staking percentage
B - what percentage of net gain you want to scalp away each time.
Those are two scalping scenarios.. there are undoubtedly many more possible.
eg feasibly you yourself may with to only scalp after a certain point.
eg start scalping as per above if the initial bank reaches a certain target level.
A slightly more complex approach may be seeking to scalp at times of better than usual short term performance.
This spreadsheet of mine does not have all the answers.
It is simply a tool to let you test a few scenarios and see the final £ figures based on real life data.
It is set up with Nh Portfolio past results data but you can of course substitute in your own alternate data if you have a method or a system of your own.
Some of you may even be able to mimic my spreadsheet calcs ..tweak them a bit and come up with additional scalping formulae of your own.
There is a link to the spreadsheet download here.
This is work in development so to speak.
Scalping has pros but some cons too.
There is a bit of trade off between having the safety of a side pot of cash tucked away and bank total growth potential. If your money was in a building society earning 5% a year for example the best thing to do is not too touch it as year two you get 5% of the 105% of your initial deposit. With a guaranteed positive return you want to let it lie and compound. Betting is not a building society however. You can make significant fast gains..but also losses. Would some form of scalping be the shrewd move if you have made a profit but despite anticipating it, can not guarantee a positive future rate of return?
I am hoping it may educate / inspire you a little to think about the issue of extracting cash from your bank.
You can have a bit of fun at least punching figures into the spreadsheet watching the profit charts change as you do.
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