Hi Superbean, to answer your question. Firstly for compounding to work you have to have a betting strategy that will demonstrate profits at level stakes. Secondly you should also have a betting bank set aside for using on your chosen betting strategy. Your betting stakes will be solely determined by the strike rate of whatever betting strategy you will be using so that the risk of losing your bank is hopefully protected. With compounding all profits generated are simply retained in your betting bank so that your stakes can increase proportionally as and when the size of your betting bank increases.
For example this sites Stat of The Day generates a c.30% Return on Investment with a single bet every day bar Sunday. So take a £500 bank and you decide that you will place 1/50th of your bank on each SOTD advice – a £10 stake. If throughout the year you stake £10 on each selection but spend the profits you will have in theory made 312 daily bets at £10 = £3120 staked during the year. If the historic ROI (return on Investment) of 30% is repeated then you will have generated £636 in profits. So after 12 months you will have your starting bank of £500 plus the £636 of profits the selections have generated which have been spent. Alternatively you compound and retain the profits in your bank and compound after each day as and when the bank increases in size from it’s original £500. Your stakes become not a fixed £10 but 1/50th of whatever size the bank has grown to. This means that in theory using the SOTD day results and if all results were linear (they won’t be) your bank will increase by 3.6% each and every week. This 3.6% figure represents the profits generated in relation to your 50 point bank. So 6 points per week staked at 30% ROI = 1.80 points profit per week. 1.80 points profit is 3.6% of your stating 50 point bank. Repeat this each and every week and if you retain the profits in the bank increasing your stake as and when your bank reaches a new high after 12 months your bank will have reached £3145 which is £2000 more than backing a fixed £10 on each selection during the year. Your daily stakes are now £62.90 not £10 (£3145/50 = £62.90). Your 1.80 points profit per week are now £113.22 not the £18 if your stakes had remained at £10.
Most people gamble without a designated betting bank set aside from their usual day to day expenses. You can’t compound unless you have a totally separate betting bank and keep diligent records as well as being disciplined to stick to whatever betting strategy you are using. I use a high volume betting strategy for the simple reason that it suits my personality and betting style plus it’s perfect for compounding. Take a 1% bank growth per day and a £1000 betting bank can grow by nearly 35% over a month. Compound this and that starting £1000 reaches the heady sum of £33,000 after 12 months. Spend your profits every day and in 12 months you are still winning £10 per day. Be patient and disciplined and grow your bank and in 12 months time that 1% bank growth isn’t £10 of £1000 but potentially £330 of £33,000. Why do you think Warren Buffett is so wealthy? He’s the master advocate of compounding!