In Part 1 I discussed getting your bankroll together and a simple money/risk management game plan. In part 2 I want to discuss some more advanced money management ideas.
Many of you have very small bankrolls. There is absolutely nothing wrong with that. If your bankroll is 50 or 50,000 it is still wise to use solid money management techniques. What is huge risk to some is not much to others. Be honest with yourself and what you can handle.
If you have a relatively small bankroll and want to take greater risks with it then you may want to try the Kelly Criterion. The math behind the system are a bit complex. There is no need to totally understand it. What you need to know is how to use it. There are some great calculators out there like the one here. That is the one I frequently will use if I am implementing Kelly into my games.
When developing my system I actually had the Kelly Criterion in mind. I thought there may be a way to weigh the games to maximize profits. With my system there are percentages given to each game. What I have found is the games that my system gives a very high probability of winning will skew the bets so much in that games favor that the other games are virtually meaningless. So what I do is weight the games evenly. But let me back up a bit and go over Kelly in layman terms.
The Kelly system makes one huge assumption in order to work. That is you are honest in your assessment of your win probability for each bet. For a normal bet of -110 you need to win approximately 53% of the games you play in order to make money. A good handicapper is going to win 55-58% and there are a rare few who can do better than that consistently. When using the Kelly, despite hitting at close to 60% over the last 400 games, I will use a much more conservative Win prob number. I use 55%. Below is an example of how you would play 3 games using the SBR calculator.
You have 3 independent events (3 games). I use a Kelly multiplier of 1 if the bankroll is small. You can us .50 to be more conservative or even .25. Consecutive series you can keep at 1. Changing this just shows you what your bankroll would be if you did this x amount of times.
After clicking All you will see that the system says I should bet $25 per game straight and $1 parlays for all 3. My bankroll is too small here to warrant a bet on a 3 team parlay but with a bigger bankroll it would give you a number on that.
The key with Kelly is being accurate, or at least conservative, in your win probability. Like anything else if you have a bad season you won’t be making any money here, as a matter of fact you will lose it much quicker than flat betting 2%. With a $500 bankroll the flat bettor will be betting $10 on each game. The Kelly bettor has $78 at risk in total. A much bigger chunk of the bankroll. But the more games you put in the calculator the smaller the bet sizes will be.
I love using Kelly for a small bankroll. It is very difficult to do when your bankroll grows because of the size you will be betting. It is not a bad idea to take $500 or $1000 or whatever is a small bankroll for you (10% of your normal bankroll would be about right) and try out the Kelly Criterion.
Labouchere System (Labby)
The Labouchere System or Labby is one you that was created for even money roulette situations and can be used in any even money (or close to it) proposition. Because of that many sports bettors have turned to this money management system.
In short the system is based on the premise that in coin flip situations there can only be so many heads flipped in a row. Now of course any statistician will tell you that in the short term you can get many heads or tails in a row. Just like you can lose 10 straight hands of blackjack, see red come 10 straight times in roulette or lose 10 straight sports bets. When these runs happen the system gets very expensive. Let me show you how it works.
Lets say I want to win $100. I can set up a Labby that looks like this.
25 25 25 25
So I have 4 $25 bets lined up. Labby works to knock these bets out and clear the row. To do this you add the last number and the first to make your first bet. So in this case $25 +$25 or a $50 bet. Lets assume that bet loses and the bettor loses $55 (-110 odds). That $55 gets added to the end of the previous labby and looks like this.
25 25 25 25 55
The next bet is then the last and first numbers $55 + $25 = $80.
As you can see already we are now betting $80 just to get to 3 numbers and initially we wanted to win $100 total. If that bet loses the labby looks like this
25 25 25 25 55 88
It gets very expensive very quickly. The reason people fall in love with it is because you do not have to pick 53% to make a profit. As a matter of fact you do not need to pick over 50%. But where the system fails is your risk/reward ratio is so bad that you can go broke rather quickly.
I would much prefer playing a reverse labby system. That is the system is exactly the same as above except you take numbers away when you lose and add your win total to the end when you win. So using the same $100 win goal we have
25 25 25 25
If we win the first bet of $50 we would add it to the labby line.
25 25 25 25 50.
Now I am betting $75 on the next game. A win would look like this.
25 25 25 25 50 75
As you can see you are now compounding winning bets as opposed to losing ones. You will need a goal to hit to end the line or go to no numbers left which would mean losing your initial stake of $100. This is far more advantageous but used far less. The reason is you will lose far more often than you win but the wins will be far greater than the losses.
Lets keep going with a goal of $200 profit. That means the line needs to total $200 (my initial $100 plus $300 profit) The above line is now at $225. With our next bet 75 + 25 = 100. If that loses we are now
25 25 25 50
next bet is 75. A win would look like this
25 25 25 50 75
The next bet is $100 and a win would hit the goal and we would stop and start a new labby.
I would advise never using labby and only using a reverse labby for small stakes. You will need to withstand many losing lines in order to make a profit. Using too much of your bankroll will probably tap you out very quickly.
Email me at firstname.lastname@example.org with any questions. I would be happy to answer.
Part 3 I will discuss parlays