Some thoughts about money management
It seems that no blog about betting is complete without atleast one post about money management. And this is just that article for this blog. There is great deal written about subject and Google search looking for most important rules finds tens of millions of pages. And if we expand out from searching just betting money management to also include financial trading money management we find even more stuff to read. So there is bunch of stuff written already, what I am trying to do here is to highlight the stuff that I consider most important.
First and foremost, use only money you can afford to lose. Or as Dr Bob says:
Find an amount that you can afford to lose over the course of a season that would still enable you to live the lifestyle you wish to live without stressing too much about it.
I don’t know if this can be stressed enough but if you can’t adhere to this rule then don’t bet at all.
Now that we got that out of the way we can move along. Next order of business is to keep track of your bets, all of them. If you don’t keep accurate records of your betting patterns you can’t know if you are making correct decisions and emotions can’t dictate your decision making too easily. This is especially important if you are thinking about increasing your stake size. If you are continously changing that stake size you will run into troubles but on the other hand if you never change your stake and if you are making profit then you might not be employing your capital in the most optimal way. If you are betting on horses and you are not tracking your bets and you don’t know where to start, you could take a look at this example tracking sheet I made a while back.
Third and final thing in this article is consistency in your staking. If you decide on how you are going to determine your stake, be it flat stakes or Kelly criterion or something completely different then stick to it. Increase your stakes only after you have met conditions you have set earlier. Good example about what can happen in bad scenario is given by above linked Dr Bob:
On Saturday I give out 5 Best Bets that are all rated that same, 3 of which are in the morning and 2 at night. One client wagers $200 each on the 3 morning Best Bets and all 3 of them are winners. This client, feeling like I’m hot, doubles his bets for the 2 night games, wagering $400 on each only to have both of them lose. Another client with the same bankroll plays all 5 games at $200 each, as he should. Both clients won 3 plays while losing 2, but the first client is down $280 (wins $600 in the morning and loses $880 by doubling up on that evening’s two plays), while the second client is up $160.
On Sunday I give out 4 morning games as Best Bets and 3 afternoon games plus the Sunday night game is a Best Bet (let’s assume that all of the Best Bets have the same rating). The first client goes back to his $200 per game wagers and plays my 4 morning games while the second client does the same, betting $200 on all 4 of the Best Bets. Unfortunately, those Best Bets go 1-3 and both clients are down $460 in the morning. I have now lost 5 of my last 6 games, and the first client (now down $740) backs off and decides not to bet my 3 afternoon games. The second client (down $300) bets all 3 games at $200 each, sticking to his plan.
All 3 afternoon Best Bets are winners and I head into the Sunday night Best Bet with a respectable 7-5 Best Bet record so far for the weekend (3-2 on Saturday and 4-3 so far on Sunday). The first client (still down $740) decides to jump back in and bet my Sunday night Best Bet for his standard $200 and the second client (now up $300) once again wagers $200 on that Best Bet. The Sunday night Best Bet is a winner and I am now 8-5 for the weekend on my Best Bets following Sunday’s action. However, the first client is just 5-5 on those Best Bets because he was afraid of betting the 3 Sunday afternoon Best Bets after losing in the morning. Actually, 5-5 is no disaster but because of doubling up on his bets for the 2 losses on Saturday night, he is down $540. The second client bet the same on each and every Best Bet I released and he is now up $500 for the weekend.
As it turns out, I also have a Monday night Best Bet. The first client realizes that I have no won 4 straight NFL Best Bets and this is his last chance to get even for the weekend, so he bets to win $550 (risking $605). The second client also realizes that I’ve won 4 straight Best Bets, but he sticks to the plan and wagers his standard $200. The Monday night game turns out to be a losing bet and the first client ends the weekend down $1145 while the second client, betting $200 on each and every Best Bet, is up a modest $280 on my Best Bet record of 8-6 (57%) for the weekend.
That longish quote ends this article. Those are three, in my opinion, the most important topics when it comes to money management. And we didn’t even cover bankroll size and stake size yet. Maybe I need to come back to this topic in future post.