Contribution by TTT’s Vegas Wise Guy, GShap
With March Madness looming just around the corner, it’s imperative that the casual bettor does not get “action crazy” with the glorious slate of 1st round games. From those who have been getting after it all season long, to those who simply want a little extra motivation to care, I’d advise you to err on the side of caution when it comes to making your plays in the early rounds. It’s all too easy to get carried away and overexpose yourself, leaving a big hole to dig out of right from the get go. Below are some key insights on how to manage your bankroll to maximize, both your viewing pleasure, and of course, your profits.
Properly managing your bankroll is one of the most overlooked and mishandled aspects among amateur sports bettors. I firmly believe employing sound bankroll management strategy is equally as important to long term success as handicapping games. Now don’t get me wrong, no matter how flawless your bankroll strategy is, it all means nothing if your picking duds night in and night out. However, a great handicapper could, and most likely will, spend most of their betting career in the red if they do not properly tend to their bankroll.
Defining your bankroll
For starters, defining your bankroll should be table stakes when it comes to sports betting. It’s amazing to me how many amateur bettors do not have a clearly defined bankroll (myself included for the better part of my sports betting career). Those who do not operate with a clearly defined bankroll can run into a multitude of issues ranging from cash flow to over exposure. Put simply, your bankroll is the amount of money you are willing to lose. This money should be already held by you, and set aside specifically for sports betting. Think of it as a lump sum investment into a hedge fund, and each position you take on a game, is the equivalent of a fund manager trading a security. This will not only give you peace of mind, but will actually improve your handicapping—you are more likely to objectively assess games and invest proportionally to your quantified edge if you’re not worrying about whether you will be able to cover your losses. Set that money aside, trust you’re handicapping, and invest proportionally to your edge.
Quantifying Your Edge
One of the best ways to maximize your long term chances of success in this industry is to quantify your edge in a manner that allows you to identify and invest an amount that is in proportion with your bankroll. If you were able to make any sense of this article so far, then you should know that most sports bettors quantify their edge in terms of betting units. Units are used to adjust for varying bankroll sizes and provide a method to share, compare, and quantify information between those with deep pockets, and those without (ie: 1 unit for me might be different than 1 unit for Billy Walters). If my unit is $100, and I take a 2 unit position on a game, I am wagering $200, while our boy Billy may be making the same 2 unit play, for 2 million. A bettor will quantify their edge in terms of units, and then make the appropriate proportional investment depending on the size of the edge—a commonly used and mathematically sound betting strategy if you ask me. What seems to be prevalent among amateurs is not having the slightest clue as to how they’ve determined their unit size. Whether it’s merely the book minimum, or a nice round number, all bettors should have some sort of justification for how they determined their unit. After all, what’s the point of using units to quantify your edge, if you have nothing to base it off of? A great starting point is the Kelly Criterion, a statistical model that calculates unit size based off a defined bankroll—see it eventually came full circle. The basics of the Kelley Criterion suggest that a sports bettor should base his or her unit as roughly 3-5% of your bankroll (assuming the probability of winning the bet is right on the 53% threshold needed to turn a profit). Keep in mind this is not a blanket statement, rather a nice starting point for those who are seeking a way to clearly define the basis for the size of an average bet.
How Much to Risk
As for how much you should have at risk at any given moment—that’s a little trickier. In theory, this amount should be unlimited. If you have identified a particular play as a profitable and worth investing, then there’s no reason to hold back. Sports betting should be looked at more as a calculated risk, rather than a gamble. A gamble is when you flip a coin and bet heads or tails, while a calculated risk is an identifiable edge that can be quantified into a monetary investment deemed profitable over the long haul. With that being said, if you have your entire bankroll is at risk this Thursday; your issue is well beyond that of bankroll management—do you really believe you have an edge big enough worth investing in every game on the board? As a general rule, if you are risking more than 40% of your entire bankroll at any given time, chances are you are spreading yourself too thin, and might want to rethink your handicapping strategy.
Regardless of how much you already have at play, if you think you have identified a quantifiable edge worth investing, no need to be gun-shy; trust your capping, and fire away. Employ some of the philosophies I’ve outlined above, and not only will your bankroll last the entire tournament, you may even be stopping at the window or getting paid from your guy when all is said and done.