How to Manage Your Bankroll
Every “sharp” is well-versed in sports betting money management. If you’re just getting started in sports betting, it’s essential to learn the basics of how to manage your hard-earned funds. In this guide, we’ll take you through the necessities, and then move onto a slightly more sophisticated method of money management.
I’m Starting Out, Do I Need To Maintain My Bankroll?
Yes. Every sports bettor should always be conscious of their bankroll, no matter how often or how much they intend to bet. To be successful, it’s necessary to blend your sports knowledge and research with a tiny bit of mathematical precision.
Even if you’re just looking to inject a bit of excitement into the week’s games – or turn a profit – you need to know how to manage your money realistically. If you don’t know how to handle your money, you’re going to suffer. Whether you’re looking to maximize entertainment or your bottom line, money management is essential.
The Three Simple Steps to Managing Your Bankroll
Just remember the following three steps, and you’ll have a basic grasp on how every “sharp” bettor regulates their bankroll.
1. Determine the Size of Your Bankroll
How much money do you want to deposit into your sportsbook? This depends on your individual financial comfort level. Never bet any money that you can’t afford to lose.
Any definition of “afford to lose” varies significantly from person to person. Be realistic in assessing your financial situation, as well as how much you can afford to hand over to an online sports betting site.
Once you’ve established how much you’d be willing to (hypothetically, of course) lose, pick a figure that accurately reflects the amount of time you’re eager to invest. If you’re going to place bets 3-4 times a year on major sporting events (think the Super Bowl, March Madness, and the NBA Championships), then you should invest less money than if you’re planning on making one bet a day (or more).
It’s integral that you set a number you’re comfortable with and stick with it. This is a crucial component of successful sports betting money management, because if you’re continually depositing and withdrawing, it becomes a lot easier to lose track of the bigger picture.
Bank with one lump sum and you’ll have a clearer picture of how to track your money and build a structure around it.
2. Choose a Unit Size
Now that you’ve set aside a pre-ordained bankroll, what percentage of your bankroll will you wager on any one event? For beginner bettors, we recommend that you stay consistent: Select a unit size somewhere between 1-5%.
How do you determine where you fall between 1% and 5%? Generally, if you have a moderate-to-large-sized bankroll (think $200 or more), we recommend that betting 2-3% of your payroll per bet. For smaller bankrolls, it’s better to wager between 5-8% to generate any real traction.
This isn’t a hard and fast rule. Many sportsbooks allow you to place minimum bets of $1-2, so its possible to stay in the 2-4% range with deposits as low as $50 or $100.
Conservative sports bettors should bet 1-2% of their bankroll per single bet. In contrast, more confident and aggressive bettors may consider betting 3% of their bankroll. If you’re extra confident in your sports betting knowledge and skills, then it’s possible that you could increase your unit size to between 4-5% of your total bankroll.
Of course, this increase in the size of your bankroll is quite risky. A losing streak could quickly wipe out your entire bankroll.
Staying somewhere between 1-3% of your bankroll is the happy medium that we recommend. This allows you to stay measured and disciplined in your sports betting.
You might be thinking that 2-3% of your bankroll per bet is too ‘safe’. After all, if the professional “sharps” are making a living off of betting on sports, they must be making huge bets with huge payoffs, right? Not really.
A professional bettor will likely never bet more than 1% of their bankroll on any one event.
Their approach is to take things slow and steady, and it’s the approach that works when it comes to successful sports betting.
3. The Final Step: Reevaluate Your Bankroll
Sports betting–much like sports themselves–are highly dynamic. No matter how enticing a bet may be, it’s worth recalculating what your unit size is throughout your sports betting career. The percentage of your wagered bankroll can be changed. What’s more: if you’re winning or losing in a big way, adjustments need to be made.
Dial back your unit size if you’re on a losing streak and your overall bankroll is quickly evaporating. Don’t start to bet more (an increase in your unit size) when you’re on a bad run, in an effort to recoup your losses. That’s a classic “square” strategy. When you’re in a rut, sit back, refocus, and reevaluate. If you decrease your unit size, it prevents you from losing too much, too fast.
If you’re just betting for entertainment purposes, decreasing your bankroll is the right move. Your bankroll will have greater longevity, allowing you to stay in the game longer. Of course, you have to adhere to your sportsbook minimum betting requirements.
Professional sports bettors realistically hope to win 60 percent of their bets, meaning that they expect to lose at least 40 percent of the time. Losing is part and parcel of sports betting, no matter who you are.
When you’re on a hot streak, we advocate that you keep your unit size at a healthy percentage that aligns with your risk tolerance. Don’t bet more than 5% on any one event. However, if you’re hot and betting with a 2% unit size, it might be worth it to increase your unit size (from 2% to 3%). However, don’t do anything crazy just because you’re having a good spell! Things quickly change in sports betting.
Managing Money vs. Picking the Winners
Picking the winners is obviously the most crucial part of sports betting. Those who can consistently predict the winners not only rake in the most cash, but undoubtedly have the most fun.
The more research you do, the more you’ll notice that in the long run, it’s crucial to ensure you’re principled and careful in your bankroll approach.
Poker player Stu Ungar is a classic cautionary tale for all bettors. A brilliant gambler with an ability to read a poker table like few others in human history, Ungar incurred over $30 million in winnings, but he eventually lost it all. Many poker experts have called Ungar the most talented poker player to ever live, but it was his failure in bankroll management that prevented him from being the most successful poker player of all time.
On a winning streak, you’re on top of the world. A losing streak, however, is the most confounding and frustrating experience for any sports bettor. With money management, you’ll be able to weather the storm, and save your bankroll when you hit a rough patch.
Where Do Sports Betting Money Management Strategies Come From?
Many of the same principles of that we’re going to recommend are rooted in simple financial strategy. Serious financial advisors, money managers, and anyone of a similar mold employ at least some form of the plan we suggested. At the heart of sports betting money management, (and investing in general) is learning and developing systems to manage your capital in a manner that is conducive to long-term gains.
When you lay a bet against the spread, how different is that than purchasing a security on the stock market? When it comes to money management and allocation of capital, the answer is not much different. You’re trying to come out a winner by manipulating a system to your financial benefit.
What Is the Kelly Criterion?
This method is simple to define, and only slightly more complicated in practice. The Kelly Criterion is described as “a popular staking method which suggests that stake should be proportional to the perceived edge.”
The Kelly Criterion Formula is as follows:
- (BP-Q) / B
- B = the Decimal odds – 1
- P = The probability of success
- Q = The probability of failure (i.e. 1-p)
If this seems a little confusing, we can represent it in other ways.
How the Kelly Criterion Works with Sports Betting
Say, for example, that you went with the Penguins beating the Rangers on the moneyline. Your sportsbook has the Penguins, they are listed at -120 (or 1.83, represented in decimal odds). The implied probability of at -120 (1.83) is a 55% chance of victory. However, you don’t believe this is representative of the true percentage chance the Penguins have of victory.
You believe that the Penguins have a 60% chance of beating the Rangers. Of course, you have to come up the 60% figure of yourself, based on your own research and calculations (this is a key component of the Kelly Criterion).
In our example, you’d have to be confident that the Penguins have a 60% chance of victory. If a sportsbook also believed this, they’d have the Penguins listed at -150 odds. At -120 (1.83), the implied probability of the Penguins winning is 54.55%.
How to Determine the Kelly Criterion
Of course, to achieve a figure with any degree of accuracy, you’ve got to be an expert and have faith in your research and calculations. The purpose of the Kelly Criterion is to bet more of your bankroll when you believe that the sportsbooks’ assigned odds do not reflect the true probability of the event.
The calculation for the Kelly Criteron would be as follows:
- B = 1.83-1 = 0.83
- P = 60% or 0.60
- Q = 1-0.60, or 0.40
- [(0.83 x 0.60)-0.40] / (1.91-1)
- 0.098/0.83 = 0.118
In this scenario of the Penguins vs. the Rangers, the Kelly Criterion would recommend that you gamble 11.8% of your bankroll.
Many professional bettors have used the Kelly Criterion, and its worked very well. Of course, you need to generate the probability of victory yourself, which makes it unappealing for the beginner bettor, but it’s a useful method to utilize as you progress in your sports betting career.
The “Proportional” Kelly
If you want to start betting like a sharp but don’t have the bankroll to back it yet, you can always use a proportion of the Kelly Criterion. For example, you could bet a “Half Kelly.”
If you use a “Half Kelly”, you don’t have to wager such a high percentage of your bankroll. Many conservative bettors use a “Half Kelly” instead of a “Full Kelly.” This is a safer way to apply the Kelly Criterion, for those of you who are more risk-averse.
This way, you can still exploit sportsbooks assigning the wrong percentage to an event, but with a smaller portion of your bankroll. In the example above, a half Kelly would simply mean 5.5%/2 = 2.75 percent of your bankroll.