Learn the secrets of betting

I am sure you would have heard comments like, ‘if you don’t have good money management skills then you simply won’t win’; or how about ‘money management is much more important than the selection strategy used’; or even ‘you won’t win if you don’t have good money management skills’.There will always be a group of punters who is always bleating about the virtues of money management. These punters believe that this mystical term ‘money management’ is a savior, which will turn their otherwise unprofitable approach magically into a highly profitable one, simply by changing the way they stake. I can tell you that there is as much chance of this happening as there is of Jess going on a date with Nicole Kidman.

Now I realise, that I might be stepping on your toes a little here, especially if you too have been brainwashed by the folks who worship these two words. As with anything else in this article, it is just an opinion and you are free of course to ignore completely what I have to say.I admit that I probably should not really feel as strongly as I do, but I tell you, I get some really horrible thoughts entering my mind whenever those two words are spoken.

Okay, what is all the fuss about? Just what is the difference between bankroll management and money management?

Money management (in my opinion) is when a punter is trying to make money from any form of gambling, purely by using some sort of staking approach. As we all know, it doesn’t matter which game we choose (horse racing, craps, sports betting, roulette etc), if we bet ‘blindly’, make no mistake about it, we lose. That is to say, that if we bet on number 7 on a roulette wheel for long enough, eventually the casino will end up with our money. We might get lucky in the short-term however, but reality will set in over a half reasonable time period.

However, if you think you can beat one of these games by purely changing the amount that you stake per race/bet/spin/hand etc, then you are still playing a losing game. That is, you are trying to use money management to beat the game. Playing a poor game, but trying to win simply through staking.

We know that if we exercise our skills and knowledge, then we can turn the majority of gambling activities into profitable exercises. (Some games are easier to beat than others).

Bankroll management, on the other hand, is the decision how to stake your selections ONCE you have found a profitable approach. It is when you are winning, that you need to think about how to stake your money, NOT before you have shown that you can turn a profit, using a specific approach by betting level stakes, which is simply, the same amount every bet.

Essentially, that is the difference. Punters who try to beat a game solely through staking are using money management. It may be great fun, don’t get me wrong, but not so good for the wallet.

Now it would be ignorant and arrogant of me not to mention the fact, that this whole idea of staking is quiet contentious. There a millions upon millions of punters who will swear (maybe even the majority of punters) that you can turn a losing approach into a profitable one through ‘clever money management’. If that is the case, then please, don’t let me stop you. The best thing that any punter can do is continue with whatever is successful for them. Very simply, if your staking approach works for you, then by all means, go ahead and continue.

I, on the other hand, prefer to use approaches, which actually may be proven to work, and that is where we get into bankroll management. How to make the most of a profitable approach is what bankroll management is all about, NOT how to find a winning approach through staking. If you don’t have a profitable approach, then there is NO way that you can find a profitable approach through simply staking your selections differently. This is not an idea or a hunch – this is a decade old mathematically proven fact!

Whether punters want to listen and discover what is proven to work, or if they want to throw their heads in the sand, and claim that this is all ‘academic wank’ and that it does not work (as a number of punters have kindly told me), is of course up to them.

In saying this, the question has to be asked, that if it were possible to beat an otherwise unbeatable game simply through staking, it would have to be one of the greatest mysteries in the world as to how casinos would be able to exist. Casino games, such as, roulette have much lower house margins, than say, the horse races, sports betting or keno. (For example, 2.7% house advantage on roulette, against 15% – 25% on horse racing, or 5% – 10% on sports betting.) Therefore, if it were possible, one would think that the casinos would be the first to be cleaned out.

Wouldn’t you?However, I say to you, when ones livelihood depends on these types of decisions, I feel much more confident in relying on approaches, which may be mathematically proven to be successful, even if it is all ‘academic rubbish’, rather than to rely on hunches and hot streaks. In my experience, hunches and hot streaks do not put the food on the table.

Now in a tournament sense, much of the above does not apply. This is because an entrant is playing directly against another opponent, which makes this the exception to the above rule. This is where it may make sense to use some sort of staking approach which will vary, depending on the opponent’s position. In a tournament, such as a casino roulette or blackjack tournament, simply playing your game in a steady and conservative manner will many more times than not, result in you maintaining, or possibly increasing, your bankroll to some extent. However, to win such tournaments, it is essential to use a somewhat more aggressive approach to beat the other players.

Therefore, in closing, if you are a money management fan and believe that the facts are just ‘academic wank’, and believe that games such as roulette can be beaten purely through staking, then you have one thing over those using the more mathematical approaches – you will always be welcome with open arms at any gambling establishment.

Sports Betting – Introduction to Money Management

Probably the least understood aspect of successful sports betting is related to money management. Money management is just as important as handicapping when it comes to having a profitable season. Sheer odds will dictate that everybody will pick winning teams on occasion, but not everybody knows how to manage their money in a manner that will maximize profits or minimize losses.

The first ingredient to proper money management is to establish a fund strictly for wagering. More commonly referred to a bankroll, this fund should be money that you can afford to lose, and should not consist of the rent payment or your kid’s college tuition. If you can’t afford to lose, you have no business betting. It’s as simple as that. Wait until your financial situation improves to the point where you can afford to lose a bit of cash and jump in at that point. The NFL, Major League Baseball, or the NBA aren’t going anywhere and will still be around for you to wager on, whether if it’s next week or next year.

Once your bankroll is firmly established, you’re ready to begin planning your assault on the bookmaker and your first step is determining the amount of your wagers. The method favored by most sophisticated gamblers involves wagering a percentage of your bankroll on each bet. This method is more commonly known as the Kelly Criterion and nearly all successful money management plans will use some type of variation of Mr. Kelly’s work.

Kelly Criterion

In 1956, the Kelly Criterion was developed by Edward L. Kelly, a physicist with AT&T Bell Laboratories. Kelly’s original concept was developed for betting on thoroughbred horse racing, but is applicable to all types of gambling, including the stock market and blackjack.

Kelly’s method is a mathematical formula that gives the percentage of bankroll to be wagered on an event to maximize profits, based on the odds and the probability of winning the bet. The formula looks more complex than it actually is and can be stated in three simple steps.

1. Multiply the odds of the event by the probability of winning.
2. Subtract the probability of losing from the number obtained in the first step.
3. Take the number obtained in the second step and divide by the odds.

For demonstrative purposes, let’s assume we are a football bettor who has a 56% winning percentage over time and is comfortable using that figure as the expected winning probability for future bets.

1. The first step is to take our 56% and multiply it by 11/10, the odds we give on a football bet, so we get .56 * .91 = .509.
2. Since our odds of winning are 56%, our odds of losing must be 44% or .440, which subtracted from .509 will give us a figure of .069.
3. Take .069 and divide by .91 and you will get a figure of .075 or 7.5%, which we would round up to 8%, therefore 8% would be the recommended percentage of your bankroll to wager on each game.

The Kelly Criterion also can be used when your odds of winning are less than 50%, but the odds are in your favor so that over the long run such a situation should yield a profit. For example, take a baseball team that we estimate has a 40 percent chance of winning a game, but sees the favorite installed as -180 (risking $180 to win a $100) and the underdog listed as +165 (risking $100 to win $165).

1. The first step is to take estimated odds of winning (40%) and multiply by the given odds of +165, so our first set of numbers shows .40 * 1.65 = .660.
2. Next, we take our probability of losing, which we have estimated to be 60% or .600 and subtract that from .660 and get .060.
3. The final step is to take our number from the second step (.060) and multiply by the odds on the game (of 1.65) and we get .060 * 1.65 = .099, which we would round up to .10 or 10%. Therefore, the suggested betting size in this situation would be 10% our bankroll.

For straight 11/10 wagers, the following table shows the recommended bet size per the Kelly Criterion. The figures in the left column are what we guess our winning percentages will be, while the number to the right is the Kelly Criterion’s recommended percentage of our bankroll to wager on the event.

If we estimate our winning percentage in football betting is going to be 54%, the Kelly Criterion would have us wager 3.40% of our bankroll on every play. If we believe we will hit 57% winners, the Kelly Criterion has us betting 9.70% of our bankroll on each play.

There are two essential characteristics to being a successful long term sports bettor. The first is the ability to recognise value in a given market, and the second is how to manage your investment bankroll. In other words, how to optimise that value and manage risk.

Many bettors have the ability to recognise value in a particular sports betting market, whether that be by ‘gut’ and ‘feel’ or some statistical model to asses the probability of an outcome. But once value has been identified, how much do you invest in that wager to make the most of that value while protecting your bankroll?

There are many and varied investment strategies that can and have been applied to sports betting, a number borrowed from the world of finance. Any Google search however will surely confuse the uninitiated, as a carnival of mutant theories and strategies parade down the page. Regardless, by the end of this article it’s hoped even the most inexperienced of sports bettors will be familiar with the most popular money management strategies, will have a better understanding of the fundamentals behind money management and how to increase their chances of joining the small percentage of sports gamblers who make a long-term profit.
A Slice Of The Pie

One strategy is to maintain a constant percentage of your bankroll with each bet. It’s assumed that this method will protect any bettor from losing their entire bankroll as the amount to be bet diminishes as your bankroll diminishes. It’s a little like Zeno’s paradox. The arrow will never reach its target as it halves the distance at each interval. However, while unlikely, even betting 5% of a €1000 bankroll will leave you with a bankroll of less than €200 after 33 consecutive losses.

But more to the point, it assumes equal value for each bet and additionally it expects equal odds being offered for each bet. Let’s say that bookmaker bet365 are offering odds for a team to win of 1.70. Would you really want to bet the same percentage on a 1.70 favourite as a 3.50 outsider without any recognition of their respective value? The answer should clearly be no. Further, even if you only bet on 1.70 favourites, is the probability of each 1.70 favourite winning identical in each instance? In other words, does each 1.70 favourite offer the same value? It could be the case, but its unlikely.

The Slice of the Pie strategy while offering a manner of managing your bankroll, fails to recognise value as a key part of a successful management strategy. Essentially, in the end, it will only manage the way you lose your money.
Inside out

This method is similar to the Slice of the Pie, except that it takes the further step of taking into account the odds being offered for a particular bet. So for example, you bet 5% of a €1000 bankroll as a standard unit, €50. If betting on 2.00 odds, the unit remains €50, but when betting on say a 11.00 outsider, that unit becomes €5. It can be calculated like this:

eg. (€1000 * 0.05) / (11 – 1) = €5

This works fine when betting on outsiders but what if we wish to bet on short priced favourites? If betting 5% of any bankroll, betting on a 1.05 favourite would mean betting your entire bankroll. Now I would never recommend betting on anything remotely close to a 1.05 favourite let alone your entire bankroll, (unless the odds were on the sun rising tomorrow, but even then I would probably spend a nervous night watching the darkened night sky). Regardless, the limitations of the Inside Out strategy should be clear as it still fails take into account the recognised value of a particular betting proposition.
K is for Kelly

While it still has its critics, the Kelly Method has stood the test of time since its creation in the mid 1950′s. Essentially this method takes into account both the probability of a given team or player winning and the value of the odds offered in relation to that probability – also known as ‘the overlay’. This means that it suggests you bet more depending upon how great the overlay is, but it also means you have to assess the probability of a given outcome with consistency.

The overlay is calculated simply as:

Overlay = (probability * odds) – 1

There have been many amendments to the Kelly method over the years, and although the fundamentals remain the same, each edition of the method offers its own insights.

The Full Kelly – While a proven method, the Full Kelly can make a wild ride of your betting experience and can suggest risky amounts be bet. It can easily recommend a bet of even 50% of your bankroll, which can reduce your bankroll to merely nothing in a short time. On the other hand, a winning streak can send your banroll into orbit

It is calculated as:

Percentage of bankroll to bet = Overlay / (Odds – 1)

e.g With an overlay of 0.20 and odds of 2.40 and a bankroll of €1000, the Full Kelly would recommend a bet of €143, or 14.3% of the bankroll.

The Fractional Kelly – This is a simple and conservative amendment to the Full Kelly method whereby the bettor only bets a certain fraction of the recommended bet. It could be 50%, known as the Half Kelly, 25% the Quarter Kelly or any percentage you feel comfortable with. Further, while the intuition may be that this will reduce your winnings according to the percentage you choose, it can be shown that a fractional Kelly method can return better results long term than the Full Kelly method.

The Constant Kelly – The same as the Full Kelly method, but rather than recommending a percentage of a varying amount, it recommends a percentage of a constant. So for example, instead of suggesting 15% of a diminishing or improving bankroll, it recommends 15% of a constant amount.
Busy Busy Busy

One of the drawbacks of any Kelly method is the issue of betting on multiple events at the one time. Let’s say there are 4 games you want to bet on, all being played at the same time. And what if the recommended percentage of bankroll for Bet A is 25%, Bet B is 35% and Bet C 35% and Bet D 40%? This amounts to betting 135% of your bankroll, which is obviously impossible.

One solution to this problem is to adjust the percentages proportionally so that 100% of the bankroll can be bet. i.e Bet A would proportionally become 19% and so on, as 25% is a proportional 19% of the 135% recommended. The issue with this is that firstly, you’re still betting 100% of your bankroll on 4 events which could all easily lose, and secondly, it means you’re not giving the same value to say a 25% bet on a busy day (where in this example it becomes 19%) as you would on a day when it might be your only bet.

One way to solve this is to use a fractional method so that no matter how many events you want to bet on in a single day, the total recommended is unlikely to eclipse 100% of your bank. This could well work, but as I know myself, it is easily possible to be betting on up to and over 20 events in a single day, meaning the 100% could still be eclipsed.
So What Do I Suggest?

Personally, I use a 10% fractional Kelly method. This allows me to protect my overall bankroll while I diversify and place many bets on sporting events being played daily.

So let’s say my bankroll is €5000, and I am betting on a team to win at odds of 2.60 offered by bookmaker Pinnacle Sports. Now let’s say I have assessed the probability of this team winning to be 50%, the recommended bet amount would be calculated as:

(bankroll * chosen fraction) * (overlay/(odds – 1))

i.e ($5000 * 10%) * (0.30 / 1.60) = €93.75
Try It Out For Yourself

While many bankroll management strategies are available to apply, I believe that the fractional Kelly method is best, as it takes into consideration the odds on offer, the probability assessed of a team or players winning and the resulting value identified in order to recommend a bet amount that will optimise that value without risking your bankroll and an early end to your career as a sports bettor.