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betting strategy (via the Bank Vault Report, published by www.Bismarx.co.uk), I decided to do some calculations on certain key factors (partly because it seemed too good to be true!). Chief among these was the question of liability control, which I could see would be an important factor for those traders (such as myself) with relatively limited capital. The plan works on the basis of a ‘lay ladder’ of five horses, where successive selections are layed, with a fixed profit for the ladder as a whole, and stakes increasing to cover additional losses if the earlier selections win (i.e. the lay loses). The first question that may come to mind is: ‘what happens if all five horses win?’ The calculations and analysis below are essentially attempts to construct simple models to estimate a) how often this might happen, b) what the liability might be whenever this does happen. (It being a sound military strategy to have contingency plans to cope if things do not go according to plan!). The first thing to note is that (from the point of view of simple profitability) it is not necessarily such a disaster if the bank is lost occasionally. Under the Bismarx betting plan, assuming 1/20th of the bank is bet on each occasion, then the bank renews itself every 20 days! So, mathematically, as long as the average rate of bank loss is significantly less than once every 20 days, then the Bismarx plan is highly likely to be profitable (this assumes fixed stakes, but also applies to ‘progressive’ staking strategies, where the stake is increased in line with increasing bank size, as long as profits are indeed begun to be taken out regularly at some point). In fact, I believe the current data is that there has only been ONE losing Bismarck (i.e. five successive winning horses on a day) over a period of well over a year (400+ bets?). How often would one expect a losing Bismarck, statistically? The key factor here is the average rate of loss of the Bismarck selections. A statistic often quoted is that favourites will win ‘around one third of the time’. The Bismarck selections eliminate horses priced at either extreme (prices over 2.7 on the strict system, or prices under 1.7 - although in practise there is a little leeway given here), which mean that the ‘one third’ strike rate is perhaps a useful first approximation. From simple probability theory, if each horse has a probability of 0.33 of winning, then the probability of five successive winners is: 0.335, or 0.0039. This represents an event which is only likely to occur once in every 255 days! Given that the bank renews itself every twenty days, then that seems to indicate a quite extraordinary advantage to those individuals trading via the Bismarx system. Although this calculation is just an estimate, empirical results seem to indicate it is of the right order of magnitude, with a single ‘losing Bismarck’ in over a year of trading.

e. The key statistics in relation to investigating this particular factor further are: . then the probability of five successive winners becomes 0. the “80%” estimate for Bismarck ladders which don’t go past the ‘second rung’ may not be precise. on average. There will be a major difference in strike rate between horses at decimal odds close to 3. This represents an event which would be expected to happen roughly every hundred days.0184. In practise. it may be rather higher than this. selections will be made with quite a variation in price (and hence relative likelihood of winning). This figure relates to a probability of winning for a single horse of almost 0. if this was the case. in that Bismarx report that (from memory) around 80% of lay ladders end by the second leg. i. This would indicate that around 20% of the time the first two horses win. Possible explanations for this apparent anomaly? Firstly. or about 0. Given that there has only been one losing Bismarck in what (I believe) is well over a year’s trading. over and above that from the estimates above based on a simple assumption of horses being equal. then statistically it would have been likely there would have been more than one losing Bismarck.2.e. once every 411 days.7. Despite statistical fluctuations. there does seem to be one slight anomaly.0024.It would be interesting to repeat the calculation using the actual percentage figure showing what proportion of the Bismarck ‘lays’ do in fact win (as this calculation is very sensitive to small variations in this). then one would in fact expect as many as 90% of Bismarck’s to be successful by the second rung (i.may in fact be over-estimating the probability of a failing Bismarck. This would correspond to a losing Bismarck.3. however.455 = 0. every 54 days.45.01.45 (taking the square root of 0. either the first or the second horses loses). the precise statistics over the entire run of the 400+ Bismarck ladders to date would be very useful. implying: (probability of winning Bismarck selection horse)2 = 0.35. If this figure rises to a probability of 0. To investigate this more thoroughly. or 0. on average. If one then extrapolates this figure to the five legs of the lay ladder. If the figure falls to 0. It may be the case that this unevenness in fact enhances the probability of the Bismarck being successful. probability in this case of a losing Bismarck lay ladder. The second possibility (which I suspect may be more likely) is that the simplifying assumption of this model .4. it is extremely unlikely that if this is the case there would only have been one losing Bismarck in well over a year of selections (one might have expected half a dozen or more). than horses priced at 1.2). all five horses winning = 0. then the probability of five successive winners becomes: 0.4. if one third of the Bismarck selections represent winning horses (in line with the earlier assumption). However.that all horses are equal . This would only be expected to happen. So the empirical data would seem consistent with this probability falling below 0. However.

1 2) The proportion of Bismarck lay ladders which reach a successful conclusion within the first two horses. then the one final factor that the trader needs to examine is liability.1) the overall strike rate of all Bismarck horses (i. separated out into figures for horses at different ranges of odds (e. strike rate for horses in range 2.e. The whole basis of the Bismarck model of the ‘lay ladder’ is that there must be sufficient capital in the bank (and nerve on behalf of the novice to the system!) to persevere with increasing the bets as the ‘ladder is ascended’. it is clear that one should not start to ‘climb’ the ladder with a particular level of starting stake. .e. as the phrase goes. N = 2 etc. irrespective of whether they are before or after the point on the lay ladder where the first horse loses). as just a single ladder. The above calculations indicate the great potential profitability in this financial trading model. and the new Flat season increasing uncertainty about the true ability of horses). The five races will be numbered 1 to 5. There may also be non-random fluctuations. Though it would also be useful to know the total number of Bismarck ladders run to date .and random fluctuations about a mean will always happen. for race 1.). say). “The dice have no memory”. N=1.may lead to a higher proportion of favourites winning. whether that represents 300 or closer to 500 ladders would be of interest). more settled periods of racing . five losing lays on the run) appear to be relatively rare (both theoretically and empirically). So even if statistics suggest that the probability of a losing Bismarck should only occur once in every 200 days. is already known. In particular. It should also be remembered that all probability calculations are just that . (The third vital statistic in this respect (the number of Bismarck ladders which are unsuccessful). Given that losing Bismarck’s (i. I believe.69.g. It is also possible that these (well known) variations may be already priced into the market. the model used will simplify the situation by assuming identical odds for the five horses selected to form the lay ladder. Contrariwise.I only know that it is somewhere between one and two years. with LN representing the liability after race numbered N (i. if the horses tend to be at the upper end of the prices). how many do in fact win. say . 1 Even more valuable would be this strike rate. that doesn’t mean there couldn’t be two losing Bismarck’s within a week! (simply that it’s highly unlikely).April to July. for race 2.e. without both the financial resources and the determination to persevere with increasing stakes as the ladder is ascended (and bets could rise quite sharply. for example horse-racing in February may throw up a higher proportion of losing favourites (due to weather disrupting training.probabilities . The next section will explore liability levels. Call this figure W. Liability Calculations As with the probability calculations.50-2.

. The liability for 2 Note. for example. So liability can be halved by simply halving the original stake. Algebraically. For race 1. Mathematically. then this essentially means the liability even after five races has only increased relatively slowly. and the ladder is terminated at race 1. then the layer retains the stake. where you have to add up all the previous liabilities on the ladder. Now we have defined the key symbols. this will simply represent the level staked. £20 at a particular set of ‘odds to lay’. So for decimal odds of 2. there is obviously no previous liability (by definition). give the total return. The basic Bismarx formula for the liability after race N is deceptively simple: LN = O ∑(LN-1 + LN-2 + .7 . this is indicated by the high indices involved (powers from squares right up to a fifth power. or the odds for race 1 multiplied by P. If the horse loses. for a five leg lay ladder). If O is less than 1 (i. we can represent the liability in terms of these symbols. L1) + OP This just means that to work out the liability for a particular race. e. we will represent these odds by the symbol O. By ‘odds’ here are meant decimal odds (as used in Betting exchanges) minus one (as decimal odds. the liability (as common sense suggests) is simply proportional to the original staking level P (which also represents the eventual profit of the lay ladder. you add the overall profit (P) you are aiming to achieve with the ladder to the liability for all the previous races on the ladder2. the sting in the tail is that as O becomes greater than 1 (decimal odds greater than 2). for example.g. However if the horses wins. For the first race on the ladder.7 on Betfair.. and simply included the liability for the previous race only. far less obvious is the extreme sensitivity of this equation to O. . However. the more that O becomes greater than 1. including original stake). at whichever point it is successful). O (decimal odds minus one). the layer has to pay the backer this stake multiplied by the odds that the bet was layed at. where the odds this time are given as decimal odds as used on the betting exchanges (as these are what most of us are most familiar with). applying this simple-looking formula produces quite a complex outcome for race 5 (note difference from earlier versions of this paper. This is indicated in the following table.1 = 1. where I made an error in the calculation): L5 = P(O5 + 4O4 + 6O3 + 4O2 + O) Two key features of this equation.. This is then multiplied by the ‘odds to lay’. However. then the liability level starts to increase dramatically. Firstly. for the person backing the horse. to give the liability for the current race.The letter P is used to represent the profit that the ladder sets out to achieve. So L1 simply equals OP. decimal odds of less than 2). O = 2. the odds level. However. This is of course contrary to the Bismarck system.7.e. I got confused about this in the first two versions of this paper.

7 2. it does demonstrate the extreme sensitivity of the liability equation to the odds level.7. where the calculations were in error.7 Liability Leg 1 2. so it is much less likely that the fifth race would be reached. for a trader with much less than that available.7 2.000! If the trader had a betting capital of say £30.5 1.8 It is obvious that as the odds layed at increase.0 Liability Leg 4 54 33 23 13 8.2 2. Decimal Odds 3.0.0 2. if the horses were all layed at 3. either there would be insufficient capital to lay the bet at all. as a multiple of profit P: Decimal Odds 3.0 1.2 2.5 2.0 4. then the liability would be over £8.0 1.8 4. There is an obvious trade-off here. then the liability for the fifth race (where the first four horses on the ladder had all won) would be £300 if the horses were all at 1. Important addendum: the discussion in the first part of this analysis indicated a possible anomaly in the figures (in that having only one losing Bismarck in a period of 400 or so days appears to be inconsistent with the 80% figure quoted for .0 1. However.6 2. then even this might not be terminal (although the trader might question whether it is worth investing this much for what after all would only be a £50 profit at the end of the ladder).6 3.0 3. However.0 1.7 2.0 2.7 Liability as multiple of profit P for the fifth race of a lay ladder (rounded to nearest whole number) 162P 90P 59P 28P 16P 6P Here is a slightly fuller table. Note differences from earlier two versions of this paper.0 0. To put it in practical terms. What is perhaps not so obvious is how as the decimal odds go above 2 the liability starts to increase quite dramatically. However. the more they get closer to 3.2 Liability Leg 3 18 12 9.0 2.000. liability will also increase. where P is the original staking level (representing the profit aimed at for each lay ladder).7 1.4 5. which shows the liability (to two significant figures) for each stage in the ladder. in that horses at higher odds are also significantly less likely to win.2 1.4 Liability Leg 5 162 90 59 28 16 5. if the profit aimed at for each Bismarck is £50. or the liability would be such a high proportion of the capital available that the trader could decide to terminate the ladder and accept the loss.5 2.the fifth race of the lay ladder is given as a multiple of P.7 Liability Leg 2 6.

Even if this is stretched slightly for one or two horses in the ladder. (It would be very interesting to know the number of times the fifth leg of the ladder has actually been reached in practise. it would be important to balance this by having other horses in the ladder at significantly lower odds. If there is a lack of capital to put forward the liability for any race. A possible explanation for this anomaly was that the variation in the horses selected may be playing a part in producing a greater proportion of winning Bismarck ladders than may have been expected than via the calculations here which assume all the horses are equal. although the actual level of individual suggested lays fluctuated markedly. over the 400+ Bismarck ladders run so far. then 3 nb based on just a few Bismarck ladders.7 to 2. the vital question of choosing the odds limits of 1. so why are these liability calculations important? Because for 20% of the time. one might say.those Bismarck’s losing within the first two legs. As always in science. don’t fix it’. so not necessarily typical . the ‘ladder’ doesn’t get past the second horse. Its practical success in running speaks for itself. this figure should perhaps be closer to 90%).7 is indicated on the ‘strict’ Bismarx selection rules. So the trader using the Bismarx principle has the odds on their side.7) presumably undertook extensive empirical investigation of the play-off between liability and strike rate. In addition. the ladder does go beyond the second horse. according to the assumptions of this model. So despite their much greater contribution to the liability. On the basis of the small number of Bismarck selections I have been exposed to so far. empirical observations always take precedence over theoretical calculations! In terms of the Bismarx strategy itself. to reduce the risk of the staking getting out of control.) Though. This is clearly something which is taken into account in the Bismarx selections I have seen over a number of days. the same while laying is very much less likely. even reaches the fifth horse.it should be noted that even at that level. And it is important to remember that we are talking about relatively infrequent scenarios here. The original devising of the Bismarck strategy (and in particular. this would also explain why it is in fact advisable to include horses at the upper end of the odds range within the ladder. the great strength of a ‘lay ladder’ (as opposed to a win ladder) is that every other horse in the race apart from the horse you are laying is running on your behalf.23 . Apparently 80% of the time. indicating that the suggested betting bank might not quite be sufficient if the ladder went to the fifth leg. The essential principle of the ‘Bismarck’ is to persevere with the ladder until there is a loser. While very long losing sequences when going after ‘winners’ are not that uncommon. of course. the average level of odds was typically somewhere around decimal 2. according to what was available in the betting market that day. according to this simple model the liability after five races equals twenty-eight times the profit. It is a strong possibility if this turns out to be true that those Bismarck selections towards the higher end of the price range do in fact contribute particularly highly to bringing about successful lay ladders. and presumably some of the time. most of the time the staking levels wouldn’t get anywhere near this point. But this does indicate why a cut-off of 2. ‘if it ain’t broke. as the ladder will terminate significantly before the fifth race.

(It is also intriguing if the figure of only one ‘losing Bismarck’ to date also means that the ‘twenty point bank’ has always been sufficient. the importance of having sufficient capital (and psychological preparedness) to ‘follow through’ on the lay ladder. however. continuing onto horse six. Conclusion It should be noted that the mathematical models used for these calculations are simplified compared with the real situation.. whether or not it was mathematically formalised in the way done here). In principle. of course. Quite a few Bismarck ladders are somewhat higher than this. where there will be quite a range of values . As was pointed out earlier. if one wanted to be reasonably sure the bank could sustain a 5th leg Bismarck even at average odds up to 2. secondly. will a twenty point bank be adequate to fund the fifth leg on the ladder. In particular. none of this is necessary to operate the system in practise! (Though a good understanding of these principles must have gone into devising the system in the first place. accepting the slightly higher risk the bank wouldn’t sustain a 5th leg Bismarck for the sake of greater returns. on the basis of the limited sample I have seen. splitting the same bank into up to sixty points. which of course is quite different in practise. even at horse five. What these calculations do show are three things: firstly.it is impossible to stake it on the betting exchanges. just how profitable this system is. The one cautionary point is that according to this simple model (i. if the first few horses . these calculations should still be indicative of the general trends at work. the bank renews itself every twenty days (assuming a profit level aimed at of 1/20th of the bank with each daily ladder).0 or less for the five horses in the ladder. In conclusion. However. the profitability of the Bismarck model has been clearly established empirically. That would perhaps be slightly surprising (though pleasing!) in a sequence of 300+ lay ladders. The more cautious trader could operate with smaller stakes. Alternatively. according to the simple model presented here at any rate). and have both the capital and the trust in the system to keep going. the extraordinary mathematics at the heart of the Bismarx lay ladder is that a losing sequence of five lays would only be expected to happen once in some hundreds of days trading this system. on the very rare occasions when this is necessary. this short essay has simply tried to explore some of the mathematics behind it in a little more detail.5 (on the basis of the sample I have seen. one could simply accept the lost bank capital of twenty points at such a position and restart the bank at a lower level with a new ladder. I expect very few Bismarcks would operate at average odds higher than this). So the prospective Bismarck trader needs to have taken this fully on board. The bold trader could stick to a twenty point bank. only if average odds are around 2. The tradeoff for the increased caution. Clearly.e every horse at equal odds).an assumption which may be producing distorting results as far as the probability of an unsuccessful Bismarck is concerned (as discussed in relation to the ‘anomaly’ earlier). it is assumed that all horses have the identical odds and prices. particularly in terms of liabilities involved. is a rather slower rate of growth of the bank.

co.Bismarx. the need for extreme caution in backing more than one or two horses in the ladder at levels above 2. www. and thirdly.represent losing lays.uk .7.

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