Compounding And How It Works

We’ve had a few support tickets through over the last couple of weeks about how compounding works, what is it, how it works and more importantly does it work.

In today’s short article I’ll go through the mechanics of compounding and how best to use it.

So in essence, compounding is a way to increase your betting bank at an accelerated rate. We start with a sum of money and then increase our stakes with our profits. There are two ways that we can do this.

1. Instant compounding
2. Interval compounding

 

So let’s look at number 1 –

We start with a bank of £1,000 and have a 2% stake for each selection. This would mean £20 per bet. With this method, we always use 2% of the bank regardless of our position. Let’s say our first bet loses, our bank would stand at £980. Our next bet would now be £19.60 and so on.

The other way and we’ve backed a 5/1 winner with our first bet. We would now be at £1,100. The next bet would be £22.

There are a few variations on the above and some people will always stick to the original stake size whilst the bank is in the negative. When they start to hit a profit they then up the stakes accordingly.

Method number 2 then, Interval compounding is my preferred method.

Same as above we start with a £1,000 bank and stake 2%. We keep betting at 2% no matter what happens. When we have increased the bank by 20% we then compound this profit and up the stake in line with the bank. So, in this case, we would now have £1,200 having made 20% and the stakes would now be £24. We wait for another increase of 20% (on the original bank, so another £200) and then our stakes become £28.

Here’s the sequence in 20% increments –

BANK SIZE	STAKE SIZE
£1,000	£20
£1,200	£24
£1,400	£28
£1,600	£32
£1,800	£36
£2,000	£40
£2,200	£44
£2,400	£48
£2,600	£52
£2,800	£56
£3,000	£60

 

So basically with each interval of £200, you increase your stake by £4.

There are many variations on the above but that should give you a good idea on how the main principles of the method work.