Monday, April 11, 2011

Sizing Matters? You Bet!

In my previous post, I discussed some sports betting strategies. The final strategy - bet sizing - deserves its own post, because it's so important to overall profitability.

I want to share my experience with three different styles of bet sizing: Flat betting, Kelly betting and bet scaling.

Flat betting is betting a static amount every wager during a session. There is a lot of betting literature out there suggesting that sports bettors play 2% of their bankroll during a given session. So if my bankroll is $1000, I would wager $20 each on today's bets.

I find flat betting works only under the following circumstances:

1) You are a recreational bettor and profit means nothing to you.
2) Your bankroll is so big that the max bet is 2% or less of your roll.

Each sports bet you make has a different value attached to it. This is why your bet amount SHOULD be varied. By how much is really up to you.

Kelly criterion betting is probably the most popular bet sizing practiced by sharp bettors. If you can determine both the probability and the payoff odds of a given event, you can use a simple calculator to determine your bet size. (The result is expressed in percentage, where 8.25% = betting 8.25% of your bankroll.)

Now betting the full Kelly amount is the most aggressive way to build a bankroll, but it also offers the highest risk of ruin (aka busto). Many punters use a fractional Kelly method: Half Kelly, 1/4 Kelly or even 10% Kelly for the bankroll nits.

Whatever version of the Kelly method you employ, it will give you the varied bet size necessary to extract value from your wagers.

The third bet sizing method (which I currently use) is bet scaling. Scaling inolves using different bet sizes based on user generated criteria. (I guess you could argue Kelly betting is in fact bet scaling, but for this discussion they'll be separate.)

The most common form of bet scaling mentioned online is the "star play" system. Players bet 1-5 "units" on their wager, based upon some strength of the bet winning.

My method of bet scaling is completely different, although rather simplistic.

I wager a fixed percentage of my available bankroll on each wager. I know this sounds like flat betting, but it's not. An example:

I start with a $1000 bankroll and my scaling size is 10%.

My first wager is for $100, leaving me with $900 available. The second wager is for $90, leaving me with $810.

Let's say my 1st bet cashes at +120 odds (a $220 payout). Now my available bankroll is $1030. My 3rd bet is now placed, and the amount of the wager would be $103, leaving $927 available. And so on and so on...

This method of bet scaling has a few advantages IMO:

-If you're placing multiple bets at once you can consider which sizes/payoffs match which wagers. It forces you to think about the bets a bit more.

-This method prevents you from becoming "bet happy" and placing too many wagers at once, because the bet sizing gets much smaller if you do that.

-This method is very far removed from risk of ruin... as long as you stick to it!

Whatever method of bet sizing you use, remember that profitability from sports betting is derived from all facets: Shopping for good odds, at least a dash or two of good handicapping and money/bet management. Good luck!

No comments: