Betting and Staking Mistakes
The single biggest and most dramatic effect on your betting bank will not be what you bet on but how you stake, that is, the staking system that you use.
Kelly’s Criterion is a formula that can be used to work out how much of your betting bank should be risked on a bet, basically how much you should stake.
The formula takes into account the odds of the bet, the probability of it winning and the probability of it losing. With Kelly, the logic is sound. You will find that the greater the value of the bet, the higher the advised stake will be. The problem is that with Kelly, the staking can get very ‘aggressive’ and as any bettor knows, just because a bet is fantastic value, it does not necessarily mean it will be a winner. Your bank, therefore, can be eroded very quickly staking with Kelly.
Kelly Criterion example:
You find a bet at even money or odds of 2.0 (ordinarily a 50% chance of winning) that you believe has a 2% edge. Therefore the actual chance of winning the bet is in fact 52%.
In this case:
B = 2-1
P = 0.52
Q = 1 – 0.52 = 0.48
This works out at: (0.52 x 1 – 0.48) / 1 = 0.04
The formula would recommend that you bet 4% of your bank. A positive percentage implies an edge in favour of your bankroll, so your funds grow exponentially. The issue, as mentioned above, is that percentages given by Kelly can increase wildly with greater odds and value. Great if you win. Destructive if you lose.
Bettors should look at applying e.g. ‘half’ or ‘quarter’ Kelly, that is, reducing the advised stake by e.g 50% or 75% as an option.
The Martingale System
This system is often associated with Roulette but can be used for any type of betting. It was originally designed for a ‘coin toss’ game in 18th century France, where the winner would either be heads or tails – ‘even money’ odds.
Effectively you have to double your stake after every failed bet, to cover your losses with the subsequent bet’s winnings. Stakes can get wildly out of control very quickly. Even at ‘even’ money or odds of 1/1 (2.0) you will eventually hit a substantial losing run; let us say 10 losing bets in a row, which is statistically probable if you bet enough.
Using a 10 unit bet (£ / $) for illustration purposes, your stakes would grow as follows with each loss:
10, 20, 40, 80, 160, 320, 640, 1280, 2560, 5120…
Even if you had a massive bank, you might struggle to get your stakes ‘on’ as the numbers got bigger. You might also have a bigger losing run than 10 consecutive losses. At Betfile we have hit 15 losses in a row at around evens. If we’d been using Martingale, we would have been into six figure stakes!
Note: There are a number of ‘loss recovery’ staking systems out there. We recommend avoiding them all
Named after the great Italian mathematician, with this method you increase your stake in a Fibonacci sequence.
The Fibonacci number sequence is ‘generated’ by the fact that every number, after the first two, is the sum of the two preceding ones. So starting with zero:
0, 1, 1, 2, 3, 5, 8,13, 21, 34, 55, 89, 144.. and so on.
This is similar to the Martingale system and is best avoided for staking in sports betting. Fibonacci does, however, have advantages and uses as an indicator in financial trading and should not therefore be dismissed as worthless. It just depends on how it is applied.
Percentage of Bank Staking
With this type of system you stake a fixed percentage of your betting bank on each bet. One of the problems with this type of staking plan is that you can end up having your largest stakes on losing bets and your smallest stakes on winning bets, when you hit a streak.
For example let us say that you are winning consistently, your bank increases and therefore your stakes increase too. Then you hit a losing run and the problem is that you are now betting at bigger stakes, therefore it takes fewer losing bets to take you below the point in your bank where the winning run started. Similarly if you are losing consistently for a period and then hit a winning streak, you will be betting at smaller stakes and not reap the profits that you otherwise might have done using a ‘flat’ staking system.
If you have a ‘positive expectation’ and you know that you are a profitable bettor or trader, then overall you should benefit from a percentage of bank system, especially if your strike rate is good, however, the average bettor may well fall foul of this type of system.
Varying Stakes / Star Betting
With this type of system you regularly alter your stakes depending on how strong you feel your bet might be. In essence that logic is correct, the problem is that most people assign too big a stake to one bet over another.
For example, one bet might be a ‘one star bet’ and another of their bets might be ‘a five star bet’. Yet in reality there is never the value in a bet to warrant staking five times more on one bet over another.
Here it is. Keep it simple. The way we bet. A hundred point bank. One point per bet. If you bet 10 units a bet, then you need a bank of 1000 units. If you bet 1000 units a bet, then you need a bank of 100 000 units.
The only decision you need to make is whether or not to halve stakes if your bank halves. So if you exhaust 50% of your bank and are effectively down to 50 units, do you want to preserve your bank and bet 50% of your usual stake. We tend not to as you can encounter the same problem as a ‘percentage of bank’ staking system where after a ‘draw down’ you are betting smaller stakes during a correction / winning streak.
Protecting profit: Don’t get hung up on protecting your profits. Basically at the end of the day or week or month or whenever, you should be betting in exactly the same way as you always bet. I have heard people say they ‘go easy’, in a staking sense, on the last bet of the day. There is no logic in that. It could be a winner and, if so, you would win less with reduced stakes and you can be sure that a full stakes loss is just around the corner.
Stop after a good run: Don’t, for the simple reason that nobody knows when a good run is actually going to be over! Be ‘steady eddy’. If you are planning on betting full time, then you need to bet all season long.
Stop after a bad run: Don’t (see above!) you can never know when the turning point will come and, when it does, you might well recoup all your losses and more, surging into profit.
In both of the above the scenarios it helps to know if you are a profitable bettor and that can take time.
Bad luck: Don’t get too hung up on bad luck. Don’t let it affect your betting. If your analysis is correct, then luck will be on your side more often than not.
Sample: The betting graveyard is full of the headstones of many a good bettor. Many bettors give up betting after a bad run, even though they might actually be profitable long term. Their mistake? They didn’t ride out the losing bets to get to the winning ones. They didn’t know that they were good bettors because they gave up after hitting a losing streak early on in their betting ‘careers’.
Remember, even just ‘sticking pins’ – or a ‘coin toss’ – you figure to win 50% of your bets. It’s just that you can’t break even like that because you get eaten up by the sportsbook’s ‘vig’ / built in commission.
That alone should tell you that if you go 1-9 at the beginning of your betting career, that a correction will come and, as long as you are value betting, you will turn around that losing position into a winning one over the long term.
Equally, there are many bad / unprofitable bettors who hit luck early on and then slowly decline over the long term. They think they are good / profitable bettors but are not.
A sample of 1000 bets is nothing like enough to know if you are profitable or not. With the latter sample, there is still a 20% chance that your profit is down to luck.
Take poker as an alternative example. If you play an hour a day of poker, it would probably take around three years of playing to know if you are truly profitable or not.
Big odds / underdog: Don’t be put off by big odds selections. If it’s value, bet it. You won’t of course win such bets frequently but if your analysis is correct, then the winners will make up for the losers.
Short odds / favourite: Don’t ignore the short odds favourite. If it’s value, bet it. Profit is profit what ever the returns.
Losses: Don’t get too hung up on losses. They are part of betting. Bet within your means so that you are not ‘sweating’ a losing run and ride out the bad patches.
Touts: Avoid the ‘touts’, the ‘cable gurus’, the ‘get rich quick’ schemes. They are 99% phonies. Work it out for yourself.
We use a selection of US focussed sportsbooks for our betting.