Bankroll Management

Bankroll Management:

Your bankroll is the total amount of money you are prepared to spend on sports betting, and the goal of bankroll management is to systematize how you allocate those funds into bets.

Bankroll management is one of the first fundamental steps to becoming a more profitable sports bettor. Your starting bankroll amount is an entirely personal question, but it should only involve money that you are a) fully comfortable with losing and b) have readily accessible.

Once your bankroll amount is established, you want to pick a staking system based on your betting profile and risk tolerance. Please remember to always gamble responsibly.

Flat/Fixed Bet Staking

For beginners and/or recreational bettors, a common default approach tends to be fixed or flat bet staking. This can take the form of either betting the exact same dollar amount on each bet, or the same percentage of your bankroll per bet. Of these 2 flat staking approaches, betting in terms of bankroll percentage is generally more popular and recommended.

A more conservative bettor would typically wager 1-2% of bankroll per bet, whereas a more aggressive bettor may wager between 3-5% of bankroll. Betting in percentages translates to larger bets during profitable streaks, while naturally reducing unit sizes as bankroll decreases.

For example:

If your bankroll is $1,000 and you want to be more risk averse, then you could implement a unit size of $10-$20 per bet. Alternatively, a bettor with the same bankroll but a higher risk tolerance may choose between a $30-50 unit size per bet.

A diligent flat staking strategy can help recreational bettors avoid chasing losses, and increase the longevity of their bankroll. However, the non-adaptive nature of flat staking does limit its long-term profit potential, so we recommend choosing a more dynamic strategy.

Confidence/Proportional Staking

A proportional strategy adjusts bet sizings in relation to the odds of a wager, and most importantly, your level of confidence. In terms of odds pricing, a proportional approach should recognize the relative need to lower bet sizes on underdogs, while increasing on favorites.

For example:

The amount you should bet on the Toronto Maple Leafs to win the Stanley Cup at +1400 odds should typically be lower than if you were betting the Leafs moneyline at -150 odds.

Bet sizing should be roughly proportional to bet pricing, although there can be some exceptions for high value opportunities at long-shot odds. The general principle of a proportional staking system is the greater your perceived edge is, the greater your bet size should be.

For example:

If the Kansas City Chiefs moneyline is +125 but you believe they should be slight favorites, then you should be betting a higher than average percentage of your bankroll on it.

A proportional staking strategy is discretionary and therefore can lead to more volatility, especially for new and/or recreational sports bettors. However, a winning bettor should yield greater profits through a proportional approach than a fixed or flat bet staking system.

Kelly Criterion

The Kelly Criterion is the leading example of a formalized proportional staking system, and it has been successfully applied to both sports betting and financial markets since 1956.

This strategy takes into account 3 factors; the size of your bankroll, likelihood of winning, and the magnitude of your edge. You determine what you believe the probability of winning is, and you plug that into the Kelly formula along with the odds a sportsbook is offering.

The Kelly formula is: f = (bp - q) / b

Where:

f = % of your bankroll to bet

b = net odds (decimal odds - 1)

p = probability of winning (as a decimal)

q = probability of losing (calculated as 1 - p)

For example:

If the Los Angeles Lakers are priced at -110 to beat the Golden State Warriors, that means they have an implied winning percentage of 52.5%. However, based on your own predictive analysis, if you consider the Lakers to have a true winning percentage of 55% (around -120 odds), then you can use the Kelly formula to determine the optimal amount to bet.

Our calculation:

b = 1.9 - 1

p = 0.55

q = 0.45

(0.9 x 0.55 - 0.45) / 0.9 = 0.05

According to Kelly Criterion, you should be betting 5% of your bankroll on the Lakers here. This type of staking is considered full Kelly, which is an aggressive approach. Most bettors opt for betting quarter Kelly or lower, helping to mitigate losses during spouts of bad variance. In this example, a quarter Kelly bet on the Lakers would translate to 1.25% of your bankroll.

Whether or not you choose to directly implement the Kelly Criterion is up to you, but nearly all professional sports bettors agree that it is a foundational concept to at least understand.