Take the following bets: Bet A you are offered odds of 3/1 on a legitimate 2/1 shot. Bet B you are offered 3200/1 on a legitimate 2000/1 shot.

Even though B offers a slightly better advantage than A, a sharp punter prefers A. Why? Variance.

Variance is the possible range of outcomes from any series of bets. By keeping your variance low, you have a much greater chance of keeping your bankroll intact.

The trouble with low-probability events such as superfectas and pick 6's is that you can go a long, long time before collecting on them. Even if you have an edge, you can go down thousands upon thousands of dollars before realising that edge.

And maybe you'll never make the big score, because your bankroll won't be around by the time your ship comes in.

Keeping a low variance is a key to successful money management in many businesses. Take, for example, two companies, each looking for a new construction loan. Each company has been in business for four years, and they have equal yearly expenses of $750,000.

  • Company A projects total sales this year of $840,000. This figure is based on a steady $70,000 per month order flow that the company has averaged since its inception, based on orders from a large network of relatively small buyers.
  • Company B projects total sales this year of $900,000. Monthly sales figures vary widely because the company has few clients whose orders vary greatly. Last year, the monthly variation was from $10,000 a month to $300,000 a month.
  • Even though Company B projects higher profits, giving a loan to Company A is safer. Because their variance is low and they don't depend on a single order or two for their entire yearly profit (orders which might not be renewed for a variety of reasons), it's much more likely that A will remain solvent while B might well go into default.

Successful racetrack money management works on the same principle. Many small hits are more reliable than a few large hits. If your yearly ROI (return on investment) percentages vary hugely depending on whether or not some 40/1 shot wins a photo finish, how can you decide whether to increase your bets or decrease them?

But if you've been betting less on your longshots, their results won't matter that much, one way or the other. It will be much easier to get an accurate read on your ability.

Advantage alone is not the most important consideration when deciding how much to bet. More important is how likely the bet is to win.

In the charts in my book Money Secrets At The Racetrack, with a $2000 bankroll, you can safely bet $50 on a 6/5 shot you think should be 4/5, but only $10 on a 10/1 shot you think should be 5/1.

Overlays are great, but longshot overlays with low win chances create a risk of ruin if you go cold.

Now you could get hot and hit several 20/1 shots in a short span. But it's also possible that you can lose 50 bets in a row, hit one, then lose another 60. Can your bankroll handle that?

Betting big on long-priced horses or exacta combinations brings up another problem that every bet you make affects the odds (assuming tote betting). In America, a $600 win bet on a 6/5 shot at Belmont on a Saturday may not move a number at all but the same bet on a $19 shot at Charles Town on a Wednesday might cut the odds down to 8/1.

You cannot expect to move numbers by much and expect to win.

Because they've had a few big hits or maybe had one winning year, some bettors delude themselves into thinking that they are permanent, long-time winning players. They wind up betting a lot, and when their performance regresses to the mean, they wonder why they're suddenly in debt.

By keeping your variance low, betting conservatively, and betting more horses with higher win probabilities, you'll be much more likely to hang on to your hard earned money.

And now, on to another area of this betting world.

Most of us have been overloaded by a lifetime of negative messages about gambling. We've all heard about Uncle Jimmy, whose daily doubles cost him his house. Or Neighbour Charlie, once a successful businessman with a wonderful family, but now broke and alone due to too many losing exactas.

If you believe you can't win, you probably won't. And most people don't believe that punters win. How many times have you heard that all horse-players die broke?

It's remarkable how the subconscious mind directs our will, as any nightclub hypnotist's performance will demonstrate. His subjects are awake until he tells them they are getting sleepy. Suddenly, they DO get sleepy, and they go along with just about anything the hypnotist tells them.

If somebody gives us a negative message, we often take it to heart. Take a four-year-old who tries to pour milk into a glass with limited success. The wise mother may say, "Good job, you got most of it into the glass."

But too many kids hear, "You're clumsy, you never do anything right." And that's what stays with them. Our self-image is often self-fulfilling, the negative brainwashing fatal to our prospects.

At the racetrack, you frequently hear such comments as, "I'm no good at managing my money" or "I always lose Maiden races". These players expect to lose, and they're usually not disappointed.

If you're giving yourself such negative messages, change them. Try this: "Each day I'm getting better at managing my money", or "I'm learning how to handicap Maiden races". At the very least, it will put some confidence into your subconscious mind.

I've always figured that if some reasonably bright person can achieve something, there's no reason why I can't. And if someone wins at the races, why not me?

While positive beliefs and affirmations may start you off, eventually you'll have to do the real work to be successful. Is your desire to improve burning, or just half-hearted? If the latter, chances are you'll attain half-hearted success.

If you seriously decide that you want to become a winning player, you'll do whatever it takes to achieve that goal.

In dreams, we have no limits, and there's no reason to impose limits on ourselves when we're awake. If you've been losing, it doesn't mean you have to keep losing.

All of us have a capacity to learn and improve, no matter what our age and intelligence. If you say "I'm too old to learn" you're setting yourself up for failure. Instead of saying, "I can't do that", try "I can do that and I will do that". If you're going to talk to yourself, say something positive.

Sometimes you have to take one step back to take two steps forward. When Pete Sampras was a youngster, he had a powerful two handed backhand and played a strong baseline game. His coach felt that Pete should become more of an attacking player and should switch to a one handed backhand.

Soon after switching, Pete began to lose to players he had previously beaten. But he knew he was on the right track, and eventually he became one of the great champions of tennis.

In the same way, to improve your results you sometimes will have to discard some comfortable habits and replace them with new ones.

NEXT MONTH. Barry Meadow continues his absorbing article on how to be a winner at the racetrack.

Barry Meadow, regarded as one of America's greatest modern-day handicappers, has a monthly newsletter Meadow's Racing Monthly, which is available from TR Publishing. Check out his website at: www.trpublishing.com.

Click here to read Part 2.

By Barry Meadows