NoNonsense Forex video podcast

Reverse Labouchere (My Version)

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Nononsense Forex

This is a Forex trading blog, but I’m going to talk about a betting system that has served me very well in the past.

 

Is there a way to use this in Forex too?

 

Possibly.  Again, do you wanna be a pioneer?

 

THIS IS NOT FOR MOST PEOPLE.

 

Mathy, nerd-ball types only.  Everyone else will be bored to tears.

 

In Case You Missed It

 

We just did a podcast on two really bad ideas when it comes to managing your trading account, and this is what inspired this blog post.  Check out Episode 40 if you haven’t yet.

 

Towards the end, I spoke about a style of betting that actually got me booted from a local casino here in Las Vegas.

 

And I didn’t even have a real chance to do it often enough to make a killing, but they recognized a couple of patterns:

 

  1. I often looked different than the rest of the table did (I’m not Asian), so I stood out a bit (this is an assumption)
  2. The betting pattern we’re about to discuss.

 

And for the No Nonsense Forex traders out there, this is not part of the curriculum.  This is just optional fun stuff.  I do not use this for my trading.

 

But it was fun while it lasted.

 

And it takes into account a lot of things we do here.

 

This is REALLY nerdy, fair warning.  We’re going deep.

 

No pictures, no jokes, this blog will be long enough as is.

 

Po-tay-to, Po-tah-to

 

If you want to get right to what this is, just scroll down to the How It Works part for chrissakes!  We’re learnin’ stuff here.

 

This system was originally created for the game Roulette, hence the french sounding name “Labouchere”.

 

It’s also known as “Split Martingale”.  We just went over in the podcast how Martingale was a terrible option, but this does things a bit different.

 

UNDERSTAND:  There is no consistency when looking up what this is online.  There is “Labouchere”, “Reverse LaBouchere”, and a few other varieties of this, but nobody labels it the same.

 

This leads to a lot of confusion.

 

So don’t worry about what the official name of this is.  This was taken from a website a long time ago, so I forgot where my actual source is.  But you will see this version as well in other websites which mention “Reverse Labouchere”, but then you will also see other examples that are not what I do.

 

So just go by this blog post, and don’t worry about labels.  They’re inconsistent at best.

 

Every Tick Up Is Major (And Casinos Know This)

 

So where do I try this system out?

 

I knew from sports betting, how a 49% bettor will be homeless one day, while a 55% bettor can actually do it for a living.

 

That’s real.  Every percentage point you can gain is a big one and worth the effort to seek out.

 

(And people wonder why I don’t blindly subscribe to the “flip coins and let Money Management do all the work” ideal.)

 

Roulette has only about 47% player take if you stick to bets like even/odd or red/black.

 

That 3% offset in odds is tremendous for the casinos.  They make millions a year just on that 3% tweak off of what appears to be close to a 50/50 bet.

 

And even though people still swear by this on a game with those type of odds, I wanted to find something better.

 

What are the closest bets to 50/50 odds in the casino?

 

Blackjack if you know what you’re doing, and don’t have ADD like me and can focus on counting cards.

 

So no blackjack.

 

The pass/don’t pass line on craps is really close to 50/50 — only a 1.4% house take, making the player take 48.6% overall.  Much better

 

But you can sit there forever waiting for one bet to be decided this way.  Not efficient.  And I don’t like inhaling smoke or dealing with obnoxious people for too long.

 

I settled on Baccarat.  I could be a low-roller James Bond!

 

The house edge here, if you just bet Banker, is 1.17%.  Damn good, and hands go much quicker.  AND they give you a sheet of paper, which is key here.

 

I went to a free online casino and tried this out with the Reverse Labouchere method.

 

I lost pretty quick.

 

Cool thing is, you can hit the reset button here at any time.

 

What I found out, is you need to bring a LOT of money to the table for this to work.  I didn’t have a lot of money.

 

So I kept playing on the free online casino while I built a bankroll.  It took me years, but I had enough to go and do this correctly.

 

And by now, I knew it was gonna work.

 

High Bankroll, Small Bets

 

Get ready to lose interest and click elsewhere.

 

In order for this to work, you have to bet low, win small, and have a big bankroll behind it in case things go south.

 

I had to find a $5 Baccarat table for this to be successful.

 

And I had to have $5000 in my pocket just in case things got out of hand.

 

I found the table, and also found out that those are only the limits on slow weekdays.  They go up after that.

 

This was the only table I could find with these levels, so it was make or break.

 

Let’s do this!

 

Under….The…..Radar!

 

Since this was the only table I found, I had to make sure I didn’t get booted if things went too well.

 

Most people who can beat casinos are sloppy and greedy, so they get caught a lot or over-leverage and go broke.

 

I was only going to play until I won $200.  Then I would leave.

 

And I wouldn’t come back until a week later, often on a different day.

 

$5000 to win $200.   Yep.  But $200 many times over.

 

And by golly, it worked.  It worked a few dozen times.  Then one day I was asked to leave.

 

Not in the threatening way, I’ve been back to that casino to drink or watch sports or hit up the lounge.

 

Just not a good idea to go back to the Baccarat table.

 

Here’s how I did it.

 

The Set-Up

 

Forget anything else you’ve seen online, this is my way.

 

Lowest limit was $5 Baccarat.  I would only play if it was this low.

 

I would only bet Banker, since it had the best odds at 48.3%, avoiding Player and the invariable sucker bets the entire dumbass table would evangelize.

 

I would create “labby lines” which would look like this.

 

5 – 5 – 5 – 5

 

And this never changed.

 

Ignore sites that talk about lines like 1-2-3-7-10-12.  This is not a good approach in my opinion.  Keep it uniform.

 

My goal was to cross out all of the numbers in the line.  Once I did, I would win the sum of those four numbers, which was — $20

 

And I would do this 10 times to make $200.

 

In Baccarat, they give you a piece of paper to track bets and to pander to the numerology crowd.

 

While they were using the paper for whatever they were doing, I was making labby lines.

 

Not sure if this was my downfall, but it was the only route to take.

 

How It Works

 

No matter what, you always bet the sum of the outer two numbers.

 

So when you start out, you’re betting….

 

5 – 5 – 5 – 5

 

Ten dollars.  5 + 5

 

If you WIN, you cross out those two numbers.

 

5 – 5 – 5 – 5 (my strikethrough tool looks terrible on 5s, you may have to squint)

 

Now your numbers look like this

 

5 – 5

 

Your next bet?

 

Ten dollars of course.

 

If you WIN AGAIN, you cross those numbers out, record your $20 of winnings, and move on to your next line of 5 – 5 – 5 – 5.

 

If you LOSE, you take that 10 dollar bet you just made, and add it to the end of the line.  So it would look like this now.

 

5 – 5 – 5 – 5 – 10

 

Your next bet would be $15.  5 + 10.

 

If you WIN, you again, cross out the two outermost numbers

 

5  – 5 – 5 – 5 –  10

 

And now you only have one number left, 5, so your bet is $5.

 

If you WIN, you’ve completed the line.  If you LOSE it will look like this.

 

55 – 5 – 510 – 5

 

And your bet would be $10 again.  5 + 5.

 

If you WIN, you cross out the line completely and move onto the next one.

 

You get the idea.  For every line you completely cross out, you win $20, and that’s your goal.

 

Why This Is Awesome

 

Here’s the hook though, if you haven’t already spotted it.

 

For every win, you usually cross off two numbers.  For every loss, you only add one.

 

The only exception is if you have one number remaining.  Then of course, you’re only crossing off one.

 

If you were to give yourself 6 consecutive losses right off the bat, and then 6 consecutive wins, you would break even normally.

 

But with Reverse Labouchere, you would have crossed off an entire line, and won however much you set your lines for.

 

With this ratio, assuming you’re playing a game as close to 50/50 as you possibly can, this is a game-changer.

 

You would only have to win about 35% of the time long-term to be profitable.

 

The math nerds are scrambling to prove that number wrong, and for all I know it might be (this is how it was sold to me), but here’s what I do know.

 

I took the house for $200 many times before I got booted by doing things this way.

 

Except for this one time….

 

Stop Loss

 

These lines can appear like they’re getting out of control quick sometimes, especially after a bad run.

 

You’re not doubling up your bet, but you are certainly increasing it every time you lose.

 

This can be scary as shit if your lines get super high.

 

The good news is, because of this 2-1 ratio, a small winning streak can KO a really scary line in a hurry.  You just have to have the balls to carry forward with it.

 

And, in my opinion, you need to set a certain point where you take your big loss and go home.  This happened one time.

 

I always said, I’ll leave if I lose $2000 and still have a sizable line left to cross out.  If this ever happens, one more losing hand and I’m toast.

 

It happened one time.  I took the loss and stopped.

 

It sucked because that was 10 days worth of work, but I kept at it, made it back, and then some before I got found out.

 

But this “Stop Loss” was key in winning this game long-term, painful as it was at the time.

 

I Still Kept Going

 

I told you guys I was a semi-pro sports bettor back in episode 17 of the podcast.  I thank God for having this background before I started trading professionally.

 

I actually did this well before I figured out the Baccarat angle.

 

The 2 main reasons I made money in a place where almost nobody else could was because I utilized this system, and….

 

My win rate was higher than 48.83%.

 

I mentioned before, I only stuck with the one sport I was good at (college football), and every once in awhile if I had an in with a good handicapper elsewhere, I would copy their bets, but I would always use Reverse Labouchere when I did.

 

I hit about 55% overall.  Some years better, some a bit worse.

 

But I’ve never hit a Stop Loss here.   Because again, every tick up is major.  A jump from 48.6% to 55% is astronomical in the betting world.

 

I never became rich this way however, and it’s the reason no sports bettor on Earth wants to bet this way….

 

It’s very slow, very disciplined, and very boring.

 

There were only so many college football games to go around, not to mention the ones I liked enough to bet.

 

And a pain in the ass sometimes, because you have to use it on -110 type bets only, and every once in awhile you have to eat up an entire line just to cover the vig.

 

It’s easy to win little bits of money at a time, but it’s hard to win a lot of money, and it was taking up too much time and effort, so I eventually stopped once Forex trading started becoming a much better option to spend my time.

 

But there’s a big lesson here.  And a big opportunity I think.

 

Can You Hit 55% Or More In Forex??

 

I’ve never tried this, but you could if you wanted to.

 

Hell, for making this far in the blog post, I hope you become a trillionaire this way.

 

You have a system of entries that give you more than a 55% win rate?

 

Do you think you could do the same, even if you lowered your stop loss to 1ATR instead of 1.5ATR?

 

If you could do this, you could actually trade Forex this way.

 

I am not advocating this, (it’s not going in the Money Management section) but if you were to make a trade, and the ATR was 80 for example…

 

Simply by using this system, you could just play “race to 80”.  Take full profit at +80 pips, take a loss at -80, whichever happens first.

 

You have some things in your favor:

 

  • A system that is proven to give you a good win rate (and if you don’t, you will soon if you keep at it)
  • A demo account which you can set at a high amount of money, and bet small
  • Time to test this out on a separate demo account while you test your normal system elsewhere.

 

Just a thought.  Just thinking out loud over here.

 

Hurdles That Aren’t Really Hurdles

 

One of the things you may run into when doing this on Baccarat, AND if you’re betting the Banker, is a 5% house take on wins.  Or, you may not.

 

I did not.  I played at a table which had an offset here.  If the sum of the cards equaled 7, it was an automatic push (tie).  They did this so they could feature yet another sucker bet on the table (7 pays 40 to 1 or something like that).  And this meant there was no house take on Banker wins.

 

I was very okay with this.

 

I had a lot of ties that should have been wins, but as you’ll soon find out, the name of the game is not not lose.  Just like here at No Nonsense Forex, we win by not losing, and I was totally fine with this.

 

But if you do not have this option, you’re just going to have to do what I did with sports betting and have something called a juice line.

 

This is a line you’re going to have to cross off just to cover the house take.  It’s a minor pain in the ass, but very minor in the end.

 

Conclusion

 

I brought my Baccarat results to my buddy who is a self-proclaimed math guy, and he says I got a bit lucky overall, but it is very plausible to get numbers like this over and over.

 

The stop loss part of it, he said, was the key actually.

 

I still bet sports this way.  I don’t bet a lot, but when I do, I go to my old steno notepad and use my labby lines.

 

It works, and I swear by it.

 

It just has way too much going against it for most people to want to try.

 

And this just might be my favorite part about it.

 

 

— VP

 

Please don’t ask me questions on this going forward, this is a one-off type blog post.  Explaining this to people in print form is exhausting to me.  Do your own research.  It’s out there.

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