Lots of factors contribute to a person’s chances of long-term success as a punter. If you want to be profitable the bottom line is that, over the long term, you need to be able to consistently back horses at prices which are higher than their actual probability of winning.

There are a large variety of approaches and methods that people take to achieve profitability and to find an edge over the market. Generally people will use a mix of methods such as form evaluation, visual impression, race-times including sectional timing evaluation, trainer and jockey study, various stats and trends and so the list goes on.

 As well as selecting the appropriate horses to bet on people then have to establish a staking strategy, manage their betting ‘bank’ and find ways to get their money on.

All that done all should be good, shouldn’t it? Not always…

Even if your selection methodology and price evaluation strategy is sound and you are theoretically able to ‘beat the book’ there is still one major obstacle in your path, an obstacle that is overlooked by many punters and one that can derail your efforts spectacularly – that obstacle is your own mind.

I would guess that almost everyone who has bet on horse racing in a serious way has experienced what you might term the roller-coaster of emotions or stresses that inevitably come as part and parcel with the pursuit. That roller-coaster can often cause those who start out with the necessary tools to succeed (sound selection and betting bank management strategies) to find they are very quickly struggling. Before long their bank can be bust, their confidence shot and the individual is left wondering where it all went wrong.

I am a firm believer that the most important skill required of a successful punter is an ability to manage his/her psychology. I’ve seen plenty individuals who are good assessors of form, good analysts of racing data and good spotters of what we term ‘value’ (horses whose price is longer than their true winning chance) yet they often struggle to make their betting pay in the long term.

What is it about how we think and how our brains work that can work against us when it comes to betting successfully?

As you might expect there is no easy answer to that question. Our brains are extremely complex organs and, while physicians may now fully understand the workings of the heart and the liver, for example, their understanding of the mechanics of the brain is still very much a work in progress. However, through advances in the fields of psychology and psychiatry, we do now understand certain aspects of how the operation of the brain manifests itself in terms of human behaviour.

There are many facets of the psychology of human behaviour uncovered by science that can potentially impact a person when it comes to managing their betting activities. We all have different psychologies, no two individuals will think in exactly the same way or will demonstrate the same behaviours when faced with the different situations we all face in life. This is because the genetic make-up and our life experiences (our nature and nurture) is not shared exactly between any two people. It also explains why there is a difference in how an individual may react in a given situation compared to someone else facing the same circumstances.

But in most situations humans exhibit a general tendency to react or behave in specific ways. Understanding the positive and negative situations that a bettor can face and how our reactions and behaviours generally tend to manifest themselves when we are faced with these situations can help us to develop strategies to allow us to behave and react more optimally when facing the challenges that serious betting present.

It’d be beyond the scope of a short article such as this to discuss the entire breadth of factors that we may need to be aware of in this regard so my intention is to simply introduce one or two key concepts and guide anyone interested to further reading and resource.

A starting point for anyone interested is Daniel Kahneman’s book ‘Thinking, Fast and Slow’. Kahneman won a Nobel prize for Economic Sciences in 2002 in recognition of his work developing Prospect Theory, the founding theory in the field of behavioural economics and behavioural finance, and Thinking, Fast And Slow summarises many of the ideas he and a colleague, Amos Tversky, developed during decades of research and experimentation.

One of the key ideas that they demonstrated early in their work was that humans tend to demonstrate a range of heuristics (consistent mental processes) and cognitive biases (systematic deviation from norms or rational judgements) when faced with certain situations or specific types of judgements. Many of these biases have practical implications in a variety of endeavours, including financial trading and betting.

You can find lots of information on the range of different cognitive biases on the internet and I’d encourage anyone to have a look and to reflect on how each of the biases might manifest themselves in relation to horse racing analysis in general and betting in particular.

For the purpose of the article and for want of space, I want to focus on one bias in particular, a bias known as Loss Aversion. The proposition of Loss Aversion is that people react, emotionally and in terms of their thinking, in very different ways when presented with winning in comparison to the emotional reactions and thought processes invoked by losing. In short, in the words of Kahneman, people ‘feel’ losses more acutely than they ‘feel’ gains.

Real life examples of how this manifests itself might be people’s reluctance to sell a house at a lower price than they bought it for. They would, in equivalent terms, feel more pain from selling for £15k less than the purchase price than the pleasure they’d experience from selling it for £15k more. In finance people are more reluctant to sell or offload losing stocks than they are to hang onto winning ones.

If your betting strategy involves trading prices on Betfair, for example, it is easy to see how this could influence you. You back with the intention to lay when the price shortens but the price goes against you. That fear of the pain associated with your loss can cause irrational decision making. The price has gone against you and continues to go against you but you hang on, increasing your losses by the second, in an irrational hope that somehow the whole thing will swing in your favour. Alternatively, the price does go in your favour but you yield to the temptation to trade out and take your profit too quickly because of an irrational fear that you will somehow, paradoxically, lose your gains! The fear of losses or potential losses dominates the psyche over the emotions invoked by wins.

Kahneman said ‘you should get rid of your losers and stick with your winners’, something that makes intuitive and obvious sense to us all I suppose, but demonstrated that in reality there is a strong tendency or compulsion for people, all of us, to do exactly the opposite. The cash-out options recently developed and offered to customers by online bookmaking companies are invariably framed in favour of the bookmaker and play to this fear of loss.

The magnitude of the weight of the pain of losing versus the pleasure of winning has been studied extensively and is generally thought to work out at somewhere around 2:1. The emotions and feelings associated with loss will be twice as powerful as those associated with a win. This is a significant difference and can explain why we begin to start to act irrationally in the face of losses.

When you listen to the mistakes bettors talk about making you can trace many of them to an emotional or behavioural aspect rather than a failure of logic. Imagine the bettor who has a relatively sound selection strategy which tends to yield ‘good’ bets, bets where the person is, in general, betting on horses whose winning chance is better than the odds they’ve backed the horse at. Such a person should always win in the longer term but it often isn’t the case that they do. So, what goes wrong?

Losing runs are an inevitable mathematical outcome that will occur with any form of betting. Depending on the average probability of win/loss for the horses or events you bet on you will eventually encounter losing runs at the extreme end of the statistical expectation based on those probabilities. You can actually calculate the likelihood of losing run frequency (how often you should expect losing runs of a given duration) and the longest runs you should expect in any sequence of bets if you know the prices/probabilities you are betting at. These can be surprisingly long, even betting at shorter prices, and are often not well understood by people who bet. For example, if you placed 1,000 bets at odds of 4/1 you should expect, and not be surprised by, a losing streak of just over 30 bets during the course of those 1,000 bets. 30 losers in a row betting at odds of 4/1 is something that, I would suggest, might test the emotional mettle of even the most hardened gamblers.

You can also calculate the probability of hitting that losing streak. Betting at 2/1, for example, you would have around a 30% chance of a losing streak of 17 occurring in a 1,000 bet sample. Once you’ve had 10,000 bets at the same odds your chances of 17 losers goes up to 95%+. Important to recognise that the 17 losing bet sequence is just as likely to occur at the start of that 10,000 bets as it is to occur in the middle, the end or at any point in between. And no one is immune to them, the probabilities alone determine the losing sequences, their duration and when they occur, not the skill of the bettor.

The first thing to master then is the emotional effects of a losing run and how to cope when they occur. We know that we feel losses more acutely and we also know that, because our subconscious reaction is to avoid that pain, we’ll tend to react irrationally to these losses and reach for ways to short-circuit or avoid the loss. In betting this tendency might manifest itself in various behaviours, most of which are familiar to many of us.

We might increase stakes in an attempt to win back what we’ve lost more quickly. We might start backing more frequently, again to try to offset the loss quickly. We may deviate from what has been our successful strategy in the painful face of an inevitable losing run and start backing horses at shorter prices, to get some ‘wins’ under our belt and avoid the pain of losers. Alternatively we might start to irrationally back horses at longer prices in the belief that the one big winner will get us back on track quickly.

In gambling terminology it is known as chasing losses or going on ‘tilt’. We begin to act irrationally and in progressively more desperate ways as the losses mount up and it can have catastrophic results. People can increase stakes way beyond what their betting bank can sustain and get into financial difficulty as a result. It can, in short, lead to ruin.

So what steps can we take to avoid this sometimes overwhelming tendency to react irrationally in the face of losses and losing runs.

First of all we need to accept that we’re not immune to these biases. Understand what they are and how they are likely to affect you. Reflect on whether you recognise them from your own betting history and experiences (individuals may be more or less susceptible to certain biases).

Then there are certain practical steps that you can take. These will depend to an extent on the personality and psychology of the individual but there are certain measures that are generally likely to mitigate the tendencies I’ve highlighted.

Firstly, write down all your bets. There is nothing more powerful than keeping a written record, either on paper or on a spreadsheet, which catalogues each bet and the ongoing success/failure rate. You’ll probably find that writing down losses will feel more painful than the pleasure when writing down the wins, particularly when the losses mount. You’ll probably be quicker to update your records or spreadsheet when you’ve had a winner than you will be when you’ve had some losers.

Then frame your written record against a set of expectations (based on the probabilities you bet at and your expected success rate) which will highlight for you what the frequency of losing runs should be and how long you can expect  them to be – there are internet resources which will help you calculate these. If you bet at 5/1, on average, and you calculate and anticipate those losing run frequencies and durations then you will be better placed to manage your emotional response when they occur and be less likely to panic and start acting irrationally.

I personally maintain written targets for strike rate expectation, expected losing run frequencies and durations for defined numbers of bets. It doesn’t make me immune to negative emotional responses when backing losers but it means that I am clear in my expectations of how often they will occur, they don’t tend to be a surprise and this clear expectation tends to result in a lessening of the intensity of the feelings of disappointment, that empty gut-feeling we have all had in the face of sustained losses. When I am not hitting those targets over a defined number of bets (and this will be over a reasonably long period) I know I need to look at my selection or staking strategies but I am much less likely to panic and chase losses or go on tilt in the face of short term setbacks.

Another powerful thing to do is to be clear at the start of each betting day what your bets are, what your stakes are and have the prices you will back or lay at firmly defined. Write them down. Then don’t deviate. First three lose, don’t be tempted to reduce or increase stakes on the fourth. Same if first three all win. Unless there is a compelling reason to do so, such as the unfolding of some edge during the course of the day such as an emerging draw bias or a going change, stick to a plan you’ve identified prior to the start of your betting activities. Apart from those special situations, changing your bets or stakes during the course of the day will usually indicate that you are falling prey to the unconscious processes and tendencies described earlier in the article.

Understand the biases, understand how they may affect you and put some disciplines in place to counteract them. Don’t rely on thinking your intuition will know how to deal with these tight spots when they occur, it’ll let you down!

Even with some strategies or disciplines in place you’ll still feel bad when you lose, worse than the corresponding pleasure when you win, and losing happens more often than winning so you’ll encounter the feelings frequently. Be ready for them and you’ll be much better placed to avoid falling prey to your natural instincts which, in the face of our proven cognitive biases when faced with losses, can result in irrational actions and behaviours and the associated poor outcomes.

If you are interested in any of the ideas discussed here then for further, introductory, reading I’d recommend ‘Thinking, Fast and Slow’ by Daniel Kahneman, ‘The Black Swan’ and ‘Fooled By Randomness’, both by Nicholas Taleb and a book called ‘Against The Gods: The Remarkable Story Of Risk’ by Peter L. Bernstein. I’d also suggest searching out some of the many internet resources where cognitive biases are discussed.