Some friends and I were discussing various betting strategies. We went over all the staples, like progressions and target approaches, level stakes, the Kelly, and so on.

Then someone brought up the “square root” method. It proved to be the most interesting of all the tactics we chatted about.

Longtime PPM readers may remember that some 10 to 15 years ago we had something about the square root staking. It has its followers and its critics. No, it’s not the ultimate answer. Yes, it’s worth considering because it may just improve your profitability.

Basically, it’s a simple method of increasing your stake when you are in profit. The more in profit the bigger the stake.

Your stake is divided into two parts; the Base Stake (BB) and the variable amount (SR) which increases as the bank increases.

Let us assume that you have a bank of \$2,000 and you are betting to a 20 unit bank. In other words 1 per cent stakes.   This means that you will be betting \$10 as your Base Stake (BB) and you will always bet \$10 from now until the cows come home.

Now when it is time to place your bet you check to see if you are showing a profit. In this example, if you have more than \$2,000 in the bank.

If you are showing a profit, let’s say you have \$2,049 in the bank, a profit of \$49, then what you do is calculate the square root of the amount and then add that to the stake.   So if your starting bank was \$2,000 and you have \$2,049 then the next SR part of the stake would be \$7 (the square root of \$49).  Therefore, this next bet would be £17.

And that’s it. If the bank is showing a large profit then the stake will be large.  If the bank is showing a loss then the stake will be the bare minimum of \$10.

James Selvidge, an American, is one of the pioneers of pushing the cause of square root staking.

He says SR betting is a better bet than going at things level stakes. He may be right, he may be wrong, and only a varying number of tests, over varying numbers of years, will come close to proving that he’s right, or wrong.

This is what Selvidge has to say in his book Money Management, published 21 years ago:

“The profit leverage in “base bet plus square root of the profits” comes from the SQ factor. The greatest dynamics come from the smallest possible base, which is \$2 (in USA).

“If the beginner starts by backing his key handicapped selections with a single \$2 base plus square root, a 30 per cent win level at a \$12 average payopff can produce a \$2,500 profit in 45 to 50 racedays with four to five key bets a day.

“Flat betting 200 races at \$2 each costs \$400; winning 60 at an average \$12 implies a \$320 profit. So BB+SR can be 800 per cent of flat bet results (actually more, as this increases as win percentage increases).

“Flat betting at \$2 those 200 races, and winning 50 per cent of them at \$12, would create a profit of \$800, a 2/1 return on risk capital.

“If you put a 50 per cent win level at an average \$12 payoff to the test, based on BB+SR, this profit isb reached by the 25th bet, with 175 races to go. By the 100th race, the halfway mark, profit would exceed \$10,000. By the 200th race, the horse player is still under \$150 as a single bet and profit would approximate \$25,000, a return on risk capital of over 60/1.”

Selvidge’s figures make for absorbing reading and eyebrow-raising attention. Whether things could ever work out so neatly in practice is another thing.

As we all know, patterns are hard to detect and even harder to predict in racing. Losing runs can be terrifyingly long, winning runs abysmally short.

Selvidge wrote the above text in 1979, but a few years later he was saying that all BB+SR flows should be mathematically structured on a \$1 base. However you do it, the square root on profits idea should be worth testing. Don’t rush in to it. Look at it carefully and see if it suits your particular sets of selections.

Check them out over an extended period. It will be well worth the time and trouble to find out one way or another if the idea holds up for you.

Summing up: You bet, say, \$10 base figure. Any profit on a series you take the square root and add that to the base bet. So if you were \$64 in profit the square root of that is \$8 so that is added to your normal \$10 bet. If you happen to, say, boost your profit to \$112 then the square root of that is \$11 (rounded up). Your next bet, then, would be \$21.

It’s easy to work out. Most calculators have a square root facility.

By Philip Roy

PRACTICAL PUNTING - JULY 2005