Risk and Bankroll Management in Sports Betting
Risk or bankroll management is a fundamental part of a winning longterm strategy in sports betting. We take a look at how to put a strong plan in place....
Bankroll or risk management isn't given as much attention as it should be by many aspiring bettors. Plenty of people who bet on sports have an eye for picking a good value winner but it's no use in the long run if it's not supplemented by strong risk and bankroll management. Being skilled in this area is fundamental to successful long term sports betting and I'm going to outline my own methods. A strong staking plan and wide diversification are extremely important in profitable sports betting.
As a rule you should risk no more than approximately 5% of your bankroll should be placed on any one bet if you are taking an efficient conservative approach to sports betting and allowing for variance to even out. 2% is of your bankroll is more than enough as a max bet when you feel you have your strongest value plays. I personally bet anywhere from 0.4% to 2% of my bankroll on a points scale which implements a Kelly Criterion style concept. Probability dictates that losing streaks or drawdowns are inevitable and if you bet too much, you will go bust (or the equivalent of).
(from wiki)
Some of you may have wondered before why I use as a guide a scale of 1-5 units. I use the above formula on my selections and equate whatever % I get to this scale. Eg: If I come up with a calculation of 10%, this equates to a 1pt bet or 40% equates to a 4pt bet. As alluded to above, 1pt = 0.4% of my bankroll and 5pts = 2% of my bankroll. I then make a few tweaks as needs be.
£100(stake) x 100(games) =£10,000(total stake)
Each win @ 4/5 would return £180
75 wins by £180(return) = £13,500
Therefore you are making a profit of £3,500 over 100 matches whatever happens on this particular night. And so then just by placing the bet, you can say it's worth £3,500/100(bets) = £35 per bet in expected value (+EV) whether or not it wins or loses on this particular occasion
managing risk and variance in sports betting |
What percentage of my bank should I risk betting?
How much should I be betting from my bankroll?
Your sports betting bankroll should be an amount of money you can comfortably afford to lose - a disposable income set aside from your life roll. As a guide, try not to bet more in a week that you wouldn't be able to replenish through work or other assets or means. In my experience this is a comfortable amount so that you're not betting scared money, but equally you are betting an amount that means something and therefore will help with discipline. Discipline in sports betting, especially re risk and bankroll management in betting is key.
What is the Kelly Criterion and expected value?
The Kelly Formula or Kelly Criterion is a formula used to optimise exploitation of value in your selections. For me, the formula is far too volatile and I use a spin of it in my own staking plan. As opposed to level staking it's a higher variance approach but a more optimal and efficient way to grow your sports betting bankroll. Kelly staking and level staking are the 2 best ways to manage risk in that department of sports betting. We can use the likes of the Martingale System or the Fibonacci sequence but they are very risky and volatile. I recommend an amalgamation of Kelly and level staking, an adjusted Kelly style staking plan.(from wiki)
Kelly Formula" F* = bp-q / b where:f* is the fraction of the current bankroll to wager; b is the net odds received on the wager ("b to 1"); that is, you could win $b (plus the $1 wagered) for a $1 bet p is the probability of winning; q is the probability of losing, which is 1 − p "
Some of you may have wondered before why I use as a guide a scale of 1-5 units. I use the above formula on my selections and equate whatever % I get to this scale. Eg: If I come up with a calculation of 10%, this equates to a 1pt bet or 40% equates to a 4pt bet. As alluded to above, 1pt = 0.4% of my bankroll and 5pts = 2% of my bankroll. I then make a few tweaks as needs be.
This is the best known staking plan for efficiency and growth in the risk and bankroll management department in sports betting. We can go fractional Kelly to play even safer with the bankroll. This type of staking should eliminate long term risk in this area and then it ultimately comes down to your ability to calculate true probabilities and expected value (EV) in the odds. This is referred to as "Risk Intelligence" - the ability to estimate probabilities accurately. The players with this ability will usually be avid watchers of the sports they are betting. They will often use a Bayesian approach to probability theory.
What is variance in sports betting?
Variance in betting
Managing and understanding variance is key to successful sports betting. Put simply in non-mathematical terms, variance is the difference between results in the short term vs your long term expectancy. It is a term often used in the volatile poker world but in sports betting it's very important you understand there can be significant upswings and downswings, especially when betting bigger odds. The key to profitability is finding this expected value in your bets over a period of time, or realising your equity. The more volume in terms of amount of bets, the better. The ways to find value in your sports betting is a topic for a future article but for now take a look at the example below....Mathematical Value Betting Example: Poli vs Shaktar Donetsk (4/5)
Remember that anything can happen in 1 game of football so take it over 100 matches in exactly the same circumstances and same price: So if I placed a bet of £100 on a Shaktar win @ 4/5 and I estimated that they would win this fixture (in these exact circumstances) 75% of times.£100(stake) x 100(games) =£10,000(total stake)
Each win @ 4/5 would return £180
75 wins by £180(return) = £13,500
Therefore you are making a profit of £3,500 over 100 matches whatever happens on this particular night. And so then just by placing the bet, you can say it's worth £3,500/100(bets) = £35 per bet in expected value (+EV) whether or not it wins or loses on this particular occasion
"Find the value and the winners will look after themselves"
Summary of risk and bankroll management strategy in sports betting
Always leave yourself a margin for error when you are estimating probabilities as a general rule, I usually look for a threshold of at least a 10% edge in EV vs my own estimation of the true probability. This means when I'm off it's unlikely still that I'll be placing a negative EV bet. Never underestimate the importance of a strong risk and staking plan, and try to diversify your portfolio as much as possible to keep that profit and loss graph steadier.