Betting Bankroll Management

betting bankroll management

betting bankroll managementAfter first writing about betting bankroll management, I’ve been getting the same two questions from readers asking me to confirm certain aspects of how I handle bankroll management.

And those questions are:

Do you keep separate betting banks for each tipster?

Why do you advise betting such small amounts? (1/400 of your bankroll)

Well today I’m going to get into both of those questions and show you my approach to bankroll management and staking plans which I believe can greatly improve your betting.

But first, Why is bankroll management so important?

I strongly believe that bankroll management is the single most overlooked component that prevents people from becoming profitable bettors.

I saw two great examples of this on Britain at the Bookies. For those of you who don’t know Britain at the Bookies is a TV series currently running on the BBC taking a look at gambling in Britain.

I heard a lot of buzz about this series so decided to watch a couple episodes. As expected their was the typical recreational punters having a small bet on the horses and a few sad tales of fixed odds gaming machine addicts.

What I found most depressing though, was the people who had the potential to do well from their betting but weren’t because they lacked self discipline and in turn had poor bankroll management.

The two people that caught my attention were Steve Palmer (the racing posts golf tipster) and a guy who works as a trader for Coral.

Steve Palmer

steve palmerSteve Palmer is a man who clearly knows his stuff when it comes to golf and is perfectly capable of spotting when the bookies are offering too high a price and taking value.

But despite this we see him spending an evening at the bookies wasting his money betting on greyhounds which he knows little about.

He also admitted he had placed 5 figure bets in the past when the biggest his bankroll has been just over £100,000.00.

That means he bet a minimum of 10% of his bankroll on one bet.

That is not good bankroll management by anyone’s standards. And surprise surprise, his betting bankroll at the time this episode was recorded was just £500.00.

The Coral Trader

Next up was one of the traders they interviewed at Coral. This trader specialized in horse racing and his job is to evaluate all the horses chances of winning a race and price them accordingly.

Now this trader has the skill set needed to evaluate horse races and do well by betting on horses that other bookmakers have overpriced.

Again, like Steve Palmer, this guy was clearly capable of being a profitable bettor.

But later in the episode he admitted he liked to just gamble for the thrill of it.

If I’m watching TV and there’s a race on I’ll have to have a bet on it, even if I’ve not had a chance to look at the race card.

I don’t get it. I don’t know about you but I’m going to take the money over the cheap thrill every time. Each to their own I suppose.

Bringing it back to the main point.

Both of these men have what it takes to profit from there betting but poor bankroll management and a lack of discipline is holding them back which I find to be very unfortunate.

How does this relate to you?

You might not be a betting expert in golf or horse racing but I suspect that if you are reading this have a few bets yourself and maybe even follow a couple of tipsters.

If so then proper bankroll management can greatly improve the results your going to achieve from you betting over the long term.

So what’s my take on bankroll management?

There is not any singular way to go about bankroll management that anyone would agree is “the best” but some methods are clearly better than others.

I’m going to go over how I approach bankroll management, explain why I approach it that way and maybe even convince you to start using this sort of approach yourself if you think you could benefit from it.

Here’s a quick summary of what I have previously advised for bankroll management.

  • A bankroll is how much money you have set aside for betting. (not the total money which you have)
  • Bet a maximum of 0.5% (1/200th) of your bankroll on each selection. (ideally this should be closer to 0.25%)
  • Adjust your stake size up and down when your bankroll has significantly grown or declined (~20% change) to match 0.5% or 0.25% of you new bankroll total.
  • Keep it simple and bet to level stakes. (There is an exception to this which I’ll get to shortly)

So now I’ll finally answer those questions I mentioned at the start of this article and go over why I generally advise the staking plan above.

“Do you keep separate betting banks for each tipster?”

The short answer is no. I don’t.

The reason I don’t do this is because I only follow a tipsters after trialing them and reviewing their results for many months.

This means that all the tipsters I follow have proved to me that their tips are high quality and are worth putting my money on.

So let me ask you a quick question.

If I believe all the tipsters I follow are all of a similar high quality, wouldn’t placing all of their bets in a day with money from the same bankroll produce similar results to placing the same number of bets from a single tipster over a number of days?

The answer is yes, in theory it should.

In reality it won’t always work out that way exactly due to the variance of betting but over the long term it will average out.

For that reason, I believe that keeping separate betting banks is a logical fallacy and is just an unnecessary complication.

One of the readers of this website mentioned to me that he was in two minds about this and that he wasn’t comfortable upping the stakes for a tipster that was preforming below par if his bankroll was growing from other tipsters.

This is a valid concern but my take on it is that all tipsters will go through poor patches. That’s just life.

I wouldn’t be following a tipster if I didn’t think their tips were going to make me money in the future.

“Why do you advise betting such small amounts? (1/400 of your bankroll)”

My approach to bankroll management is loosely based on the bankroll management strategies used by professional blackjack card counters.

Why is this you might ask? Out of all the different types of gambling I have found that card counters have the most to say on the subject with some blackjack authors writing in great detail about it.

When card counters talk about bankroll management they will often mention the Kelly Criterion.

I’ll briefly go over what the Kelly Criterion is and what it’s designed to achieve but if you want to read about the Kelly Criterion in more detail then Wizard of Odds has a great article on the subject.

The Kelly Criterion

The Kelly Criterion is a formula that can be used to calculate a stake size that aims to best balance risk and reward for advantage gamblers.

To work out how much you should be staking according to the Kelly Criterion you need to know the actual chance of your bet winning and the odds of your bet.

Knowing this you can work out what percentage of your bankroll the Kelly Criterion advises you should bet.

Simplifying the Kelly Criterion

Now I don’t want to go to the trouble of calculating a precise stake for every single bet I place based on the odds of that bet, and I’m sure you don’t either.

For that reason I have kept it fairly simple and calculated a single stake size based on the average odds that the tipsters I recommend advise on there selections.

You can do this for yourself by totaling the decimal odds of all your bets and dividing that number by the number of bets.

However, if you generally follow the tipsters that I recommend then we should end up with a similar number.

I calculated the average decimal odds for every bet I have placed this year and got a figure of 8.06.

I also calculated the average strike rate of my bets this year and got a figure of 14.56%. To get this figure I divided the amount of bets I’ve won by the amount of bets I’ve placed.

So putting these figures into the Kelly formula I get the following.

kelly betting horse racingSo according the Kelly Criterion I should be betting just over 2% of my bankroll on every bet or 1/50th of your bankroll.

So why do I recommend only betting a maximum of 0.5% on each selection?

To answer this we need to go back to looking at the experiences of blackjack card counters.

When Kelly Betting was first introduced to the world of blackjack card counting it was thought by many as the be all and end all staking plan.

But it wasn’t long after card counting teams started using Kelly Betting before some teams hit a bad losing run and lost the vast majority of their bankrolls.

This was met with cries of “We were betting full kelly! How could this have happened?”

Whilst Kelly betting is a nice idea in theory, in practice it is still a little too risky.

The Kelly Criterion is however a good starting point for a bankroll management strategy.

The Revised Kelly

Blackjack teams experimented with betting various fractions of the “ideal” Kelly bet before settling on something close to quarter Kelly.

What this means is that they take the “ideal Kelly bet”, in our case it is just over 2%, and divide it by 4.

In our case this means quarter Kelly would work out around 0.5% or 1/200th of your bankroll.

This is why I advise you bet an absolute maximum of 0.5% of your bankroll on each selection.

I personally only bet around 0.25% (1/400th) of my bankroll on any one bet.

Why do I do this?

Well there is a couple reasons.

  1. I’d rather err on the side of caution knowing that my bankroll is safe.
  2. True Kelly betting accounts for adjusting bet sizes for every bet depending on what the specific odds are and what your bankroll is at that point in time.

Because I keep it simple and bet the same stake based on average odds and not specific odds and because I only change my stake size when my bankroll has increased or decrease by ~20% betting a smaller stake makes sense to reduce the added risk that’s introduced by simplifying the formula.

You can calculate what size of stakes you should be betting by using the Kelly Criterion calculator below.

I recommend betting no more than 1/4th Kelly and I personally use 1/8th Kelly for my own betting.

What to do if two tipsters advise the same bet.

I’ve also been asked what do I do if two tipsters advise the same bet? Do I place the bet once or twice?

If two separate tipsters who I follow advise the same bet I would only place the bet once.

This is because by betting on the selection twice, I would be doubling my risk on that particular outcome and undermining the risk management put in place by my quarter (or 1/8th) Kelly staking.

Sure, I would probably win more if I bet on the selection twice but I would also win more if I doubled my bet on all my selections.

But if I did that I would lose a lot more when I hit a losing run and would run a greater risk of losing my entire bankroll.

There is a reason why I bet the size of stake that I do and I’m not going to alter it for one bet, just because two tipsters happen to advise the same selection.

When do I not advise level stakes? (The exception)

There is one exception where I do not recommend betting at level stakes with this method and that is if you are betting on a selection at unusually big odds.

Now I have used the above method to place level staked bets on the occasional 30 to 1 outsider. That is about the limit odds wise that I would be comfortable placing level stakes.

If a tipster was to advise a bet on a 200/1 accumulator you should not place the same stake as you would when backing an odds on favourite.

This sort of situation doesn’t crop up very often for me as I am not usually betting on wild big odds accumulators but if I do then I would take the total decimal odds of the bet.

In this example lets say the decimal odds are 200.

I would divide 200 by my average decimal odds for my bets. For me this is 8.06 but lets just call it 8 for simplicity.

200 divided by 8 = 25.

I would finally take my level stake size and divide it by 25 to get my total stake size for this bet.

In this case it would be 0.01% of my total bankroll.

The main take aways – (The TLDNR Edition)

It’s been a fairly long article so I’ll summarize the main points you can take away from it and apply to you betting.

  • Good bankroll management can be the difference between being a profitable bettor and a losing bettor.
  • Keep one single betting bank that covers all of the bets you place.
  • To find out how much you should be betting, calculate your “ideal Kelly bet” and divide it by 4 or 8 depending on your preference. (if you follow the tipsters I recommend this will be around 0.5% of your bankroll)
  • Recalculate and adjust your bet size if your bankroll increases/decreases by ~20%.
  • Don’t double you stake on a selection just because two tipsters advised the same bet.

I hope this article has answered any questions you may have had regarding my approach to bankroll management.

This is not the be all and end all approach to bankroll management. There are many ways to skin a cat.

This is just what has worked for me and I hope you can benefit from it by applying these techniques to your own betting.