Effective bankroll management is a crucial aspect of successful sports betting. It involves allocating a specific amount of funds solely for the purpose of placing wagers, determining the appropriate size of each bet, and closely monitoring your wins and losses.
In this article, I’ll discuss the importance of bankroll management and provide essential tips to help you manage your bankroll effectively. I’ll also cover various staking plans to help you choose the right approach for your strategy.
Article Contents
What Is Bankroll Management?
Bankroll management is a process of managing your money when betting on sports. It involves setting aside funds, determining the size of your bets, and tracking your wins and losses.
The main objective of bankroll management is to safeguard your betting bank and ensure its longevity, enabling you to continue placing bets with confidence and discipline. By implementing sound bankroll management techniques, you can mitigate the risk of catastrophic losses and increase your chances of long-term profitability in the sports betting arena.
Why Is Bankroll Management Important?
Bankroll management is crucial in sports betting for several reasons.
- It helps you avoid losing all your money in a single bet or a short period.
- It allows you to stay disciplined and avoid chasing losses, which is a common mistake made by many sports bettors.
- It helps you make rational and informed decisions when betting, rather than betting based on emotions or gut feelings.
In addition to the above mentioned reasons, there are several other factors that make bankroll management a critical component of successful sports betting. One of the most important factors is the concept of variance.
In sports betting, variance refers to the inherent randomness and unpredictability of sporting events. Even the most knowledgeable and experienced sports bettors can never predict the outcome of a game with 100% certainty. This means that even if you make informed and rational betting decisions, you can still experience long periods of losses due to variance.
However, with proper bankroll management, you can minimise the impact of variance on your betting strategy. By setting aside a specific amount of money for betting and determining the size of your bets, you can ensure that your bankroll lasts longer and that you can ride out any losing streaks without completely depleting your funds.
Basic Tips For Bankroll Management
Effective bankroll management is a critical component of successful sports betting, as it minimises the financial risk. Here are some essential tips that will help you manage your bankroll wisely:
- Set a budget: The first step in sports betting bankroll management is setting a budget. Determine how much money you can afford to lose and set that aside as your bankroll. Never bet with money that you cannot afford to lose.
- Track your bets: It’s essential to track your bets to see how well you are doing and adjust your betting strategy accordingly. Keep a record of every bet you make, including the date, the sport, the event, the type of bet, the unit size, and the outcome.
- Avoid chasing losses: Chasing losses is a common mistake made by many sports bettors. It’s when you try to recoup your losses by betting more money on the next wager. This can lead to further losses and eventually busting your bankroll. Instead, stick to your unit size and betting strategy, and accept that losses are a part of sports betting.
- Bet with value: Look for bets that offer value, which means the odds are better than the true probability of the outcome. This will increase your chances of winning in the long run.
- Be selective: It’s important to be selective with your bets and only place wagers when you have a strong opinion. Placing too many bets can lead to overexposure and increase the risk of losing money.
- Take breaks: Sports betting can be addictive, so it’s important to take breaks and avoid betting when you’re emotional or distracted. This will help you make rational and informed decisions and minimise the risk of losing money.
Next I’ll discuss the most important aspect of betting bankroll management: staking plans.
Staking Plans For Betting
A staking plan is a strategy that determines the amount of money to be placed on each bet in relation to the size of the betting bank.
In this section I cover four types of staking plans: level risk, martingale, loss recovery, and percentage of bank.
1. Level Risk (Good)
A level risk staking plan means risking a fixed stake or ‘unit’ per bet. For instance, I placed a £5 level stake throughout my Mug Betting Experiment.
It’s crucial to note that a selection method or strategy that fails to produce a profit on a level stake basis will not succeed under any staking plan. This is because, fundamentally, a profitable strategy needs to have a positive “+EV” edge.
There are two types of level-risk staking plans to consider:
- Level stake. This is where you risk the same amount per bet, irrespective of the odds. So if the odds are 2.5 or 10.0, you’d still bet the same amount. For Lay bets you’d have to calculate the correct risk (the liability) per bet.
- Level risk. This is where you determine the risk from the odds. This method accounts for the implied chance of winning. Higher stakes are placed on low odds, and lower stakes at high odds. The result is an even profit from any win, no matter the odds.
Option (2) is the better choice for betting bankroll management as it allows for more opportunities to win at higher odds, where the chances of winning are lower. By reducing variance, it minimizes the impact of losing or winning streaks on the bankroll. This results in a smoother and less volatile profit and loss graph with fewer significant swings than method (1). One significant advantage of this approach is that it simplifies the prediction of future performance.
Despite the fluctuations in the profit and loss graph, the final outcome of both methods (1) and (2) is relatively the same.
2. Percentage of Bank (Good)
The Percentage of Bank staking plan is a popular betting strategy where the amount of money wagered on each bet is based on a percentage of the total bankroll.
For example, if a bettor has a bankroll of £1000 and decides to use a 2% stake, they would wager £20 on their first bet. If they win, the bankroll increases to £1020 and the next bet would be 2% of that amount, which would be £20.40. If they lose, the bankroll decreases to £980 and the next bet would be 2% of that amount, which would be £19.60.
The idea behind this staking plan is that it helps bettors manage their bankroll effectively and reduces the risk of losing large amounts of money on a single bet. By only risking a small percentage of the bankroll on each bet, the bettor is able to withstand a series of losses and still have enough money left to continue betting.
To illustrate, let’s suppose your bank is £1,000 and you decide to bet 5% of your bank size. Here’s an example set of betting results with several consecutive losses:
- Lose £50 @ 2.5 odds (Total loss = £50, Total bank = £950)
- Lose £47.5?@ 3.0 odds (Total loss = £97.5, Total bank = £902.5)
- Lose £45.13?@ 2.5 odds (Total loss = £142.63, Total bank = £857.37)
- Lose £42.87?@ 4.0 odds? (Total loss = £185.5, Total bank = £814.5)
The next bet would therefore require a stake of 5% x 814.5 = £40.73. Already this stake is significantly less than the original £50.
Essentially, if the bankroll decreases, the stakes decrease as well, reducing the risk of further losses. Conversely, as the bankroll grows, the stakes increase, allowing for potentially larger returns on successful bets.
An alternate version of the percentage of bank staking plan is to start with a level stake, such as £50, until the bankroll grows beyond its initial starting balance. Once you have surpassed this point, you can then apply the percentage of bank rule to determine your stake size. However, keep in mind that there is no guarantee your bankroll will ever reach this threshold. In the unpredictable world of betting, it’s important to be prepared for both success and failure.
Overall, the Percentage of Bank staking plan is a conservative and disciplined approach to bankroll management in betting.
3. Kelly Criterion (Good In Theory)
The Kelly Criterion staking plan is a method of bankroll management that suggests a percentage of the bankroll to stake on each bet based on the perceived value of the bet. The aim is to maximise returns over the long term while minimizsng the risk of ruin.
The Kelly formula calculates the optimal percentage of the bankroll to stake on a bet by taking into account the probability of winning and the odds of the bet. The formula is as follows:
The Kelly Criterion formula:?(BP - Q) / B
- B = Decimal odds -1
- P = probability of success
- Q = probability of failure (i.e. 1-p)
The formula gives a percentage of the bankroll to stake based on the perceived edge over the bookmaker. For example, if the calculation suggests staking 5% of the bankroll, and the bankroll is £1,000, then the stake would be £50.
For example, suppose you are betting on Team A at odds of 2.0, where the true chance of winning is 52%. The 2.0 odds are therefore positive value, because the payout implies there’s only a 50% chance of winning. Learn more about implied probability.
In this scenario:
P = 0.52
Q = 1 – 0.52 = 0.48
B = 2.0 – 1 = 1
This works out as: (0.52 x 1 – 0.48) / 1 = 0.04
Therefore, the Kelly Criterion recommends you bet 4% of the bank.
One key advantage of the Kelly Criterion is that it accounts for the risk and reward of each bet, allowing the bettor to adjust the stake size accordingly. This helps to avoid over-staking on low-probability, high-reward bets, and under-staking on high-probability, low-reward bets.
However, the Kelly Criterion also has its drawbacks. It assumes that the probability of winning is known and accurate, which is not always the case. It can also be complex to calculate and may require significant expertise in betting and mathematics.
4. Loss Recovery (Bad)
The loss recovery staking plan, also known as the “target profit” or “chasing losses” strategy, is a betting strategy where the bettor tries to recover previous losses by adding them to a win target. The basic idea is that if you lose a bet, you increase your stake on the next bet until you win, and when you win, you decrease your stake to your original starting amount. This allows you to recoup your losses and achieve your original profit target.
For example, let’s say you start with a £10 stake and lose your first bet, leaving you with a balance of £-10. Instead of betting another £10, you decide to bet £20 on your next bet to try and recover the £10 loss and achieve your original profit target of £10. If you win the next bet, you would have a profit of £10 and you can reset your stake to the original £10 amount. If you lose again, you would need to increase your stake even further to recover the previous losses and reach your profit target.
The problem with this strategy is that it can quickly lead to large losses if you hit a losing streak. To illustrate, let’s assume you set a profit target of £20 and placed bets at various odds until you eventually won:
- Lose £13.33 at odds of 2.5 (Total loss = £13.33)
- Lose £16.66 at odds of 3.0 (Total loss = £30)
- Lose £33.33 at odds of 2.5 (Total loss = £63.33)
- Lose £27.77 at odds of 4.0 (Total loss = £91.11)
- Lose£74.07 at odds of 2.5 (Total loss = £165.18)
- Lose £52.91 at odds of 4.5 (Total loss = £218.09)
- Lose £238.09 at odds of 2.0 (Total loss = £456.19)
If the odds for the next bet are 3.0, you must wager £238.09 with an existing loss of £456.19 to achieve the initial profit target of £20!
Note that increasing the odds on each subsequent bet reduces the stake required to hit the target, but it also increases the likelihood of losing each time.
Overall, this staking plan is not recommended for long-term betting success.
5. Martingale (Disastrous)
The Martingale staking plan is widely regarded as one of the worst staking plans ever created. It involves doubling the stake after each loss in an attempt to recover previous losses and make a profit. This strategy is typically used on even-money bets, where the probability of winning is close to 50%.
For example, suppose a bettor places a £10 bet on Tottenham to beat Arsenal. According to the Martingale system, they should double their next bet to £20 on another even money outcome. If they lose again, they would double the stake to £40, and so on until they eventually win. Once they win, they would return to their original bet of £10.
Martingale may seem simple and effective at first, but in reality, it’s a dangerous plan that requires an infinite betting bank and a bookmaker who will allow you to place enormous stakes.
For example, let’s say you place bets at odds of 2.0 (even money) with £20 stakes, losing on your first seven bets before finally winning on the eighth bet. Here’s what your losses would look like prior to the 8th bet:
- Lose £20 (Total loss = £20)
- Lose £40 (Total loss = £60)
- Lose £80 (Total loss = £140)
- Lose £160 (Total loss = £300)
- Lose £320 (Total loss = £620)
- Lose £640 (Total loss = £1,260)
- Lose £1,280 (Total loss = £2,540)
For the eighth bet, you’ll need to bet a stake of £2,560 having already lost a total £2,540, in order to make £20 profit overall!
Losing streaks like this are common, and the Martingale system can quickly lead to financial ruin. In short, the Martingale system is not worth the risk, and you should avoid using it in your sports betting strategy.
Limitations Of Staking Plans
Staking plans are not foolproof. There are several reasons why staking plans can fail in practice.
- Bookmaker stake limits. If a bookie restricts your bets or has a low maximum stake for a particular selection, you may not be able to follow your staking plan rigidly. This can limit your potential profits and make it difficult to achieve your betting goals.
- Betfair liquidity. While using betting exchanges like Betfair can help overcome bookmaker stake limitations, it’s not a guarantee that you will be able to get your stake away at the odds you want. Betfair’s market liquidity can vary, making it harder to execute your staking plan consistently.
- Loss of potential profit. This might sound contradictory to what you’re trying to achieve from a staking plan. However, it’s important to note that some staking plans may suggest lower stakes in order to promote steady growth and reduce risk. This approach can also result in a loss of potential profit by not maximising bets on value.
- Complexity. The more you have to refer to your spreadsheet to check the correct stakes, the more work and admin you create for yourself. In professional betting, speed is often essential, so you want to avoid wasting valuable time on complicated staking plans that may not be practical in the long run.
Lastly, it’s imperative to keep in mind that staking plans are only effective when applied to bets with an advantage or “edge”. If you don’t have an edge, then staking plans won’t ‘save the day’. So before implementing a staking plan, make sure you have a solid betting strategy that gives you an advantage in the markets you are betting on.
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