It comes as a surprise to many bettors that you only need to win 53% of your against the spread wagers at -110 odds (bet $110 to win $100) to be a profitable sports bettor. But the math checks out; if you go 53-47 in 100 picks, your $5,300 in winnings (53 x $100) would offset your $5,170 in losses (47 x $110) for a profit of $130. So why, then, are so many sports bettors constantly heading back to the cashier for another deposit? The main culprit is bankroll management.
An old gambling axiom states that “you always lose your biggest bet”. The theory behind this statement being that if you keep adding more and more money to your bet size as you ride a hot streak, the only way for that trend to end is with one big loss in the end.
Fortunately, there is another way. Instead of chasing losses or regularly betting outside of your means, you can put a bankroll management plan in place. This will give you the chance to overcome the variance of sports betting. This will help turn your hobby into a profitable one.
What does Variance have to do with Bankroll Management?
Before we get into bankroll management strategies, it is important to understand why they are so important. To do this, we must consider the role that variance plays in sports betting.
When a fair coin is flipped, it has a 50% chance of landing on heads and a 50% chance of landing on tails. Because we know this, we can project that the expected result of 10 straight coin flips will be five heads and five tails. Each will hit 50% of the time.
But often times, in just 10 flips, the numbers will not work out that way. Sometimes the coin will land on heads seven out of ten times, or tails eight out of ten times. This is a matter of variance. The larger the sample size, the closer we can expect the distribution of coin flips that land on heads and tails to be right around 50%. One billion flips will level out to around 50/50, but four flips could be 100% heads and 0% tails.
The same is true of sports betting. Let’s say that you are a profitable basketball handicapper, handicapping games against the spread at a rate of 54% winners. In the long run, this is enough to beat the book and turn a profit. If you made 10,000 wagers of $110 to win $100 and went 540-460, you would have a profit of $3,400.
What if you made only five wagers? Assuming your average win rate, the odds of winning all five would be .54 x .54 x .54 x .54 x .54 = .0459, or 4.6%. Your odds of losing all five would be .46 x .46 x .46 x .46 x .46 = .0205, or 2.1%. In other words, in every set of five games, you’d have a roughly 1 in 20 chance of winning five straight games. You also have a 1 in 50 chance of losing five straight.
One in 50 may not sound like many. But on the road to 10,000 wagers, it figures to happen about 40 times. And what if one of those 40 times happens to come right at the beginning of your journey, with you betting a large amount of your bankroll on every game?
And this is just accounting for an 0-5 slump. A 1-4 slump or even a couple of 2-3 slumps can be equally crippling. Even the best handicappers in the world are mathematically certain to hit one of these cold streaks; and if you bet recklessly during one, it could wipe out your account.
What Unit Size should You Set?
It is tempting to keep raising the stakes on your wagers throughout a season. If you are on a winning streak, you want to try to ride that hot streak with larger and larger wins. If you are on a cold streak, it is tempting to chase your losses with bigger bets to try to win your money back. Both of these strategies are dangerous in the long run. It could eventually lead to ruin when a cold streak strikes.
For this reason, the most responsible thing to do is to set a unit size. This will be your standard bet size and it will be based on your sports betting bankroll.
That is the first step; there is no bankroll management without establishing a bankroll. Ideally, you want to select an amount you can afford to put at risk safely without fear of losing it. This will allow you to make clear decisions and stay focused on the games. Then, you won’t have to worry about a losing streak affecting your livelihood. Keep an account that is just for sports betting separate from the money you use to pay your bills. This account can fluctuate up and down without causing you any concern.
Once that amount is established, you need to decide on a unit size. A super conservative bettor might want to pick a unit size as low as 2-5%. For example, with a $1000 deposit, you could choose a unit size from $20 (2%) to $50 (5%). The 2% unit size is excessively safe, allowing you a buffer zone of a net loss of nearly 50 bets before going broke. If you were to start the new college basketball season off with a disastrous 1-9 record betting $22 to win $20 on each game, you’d be out $178; a major setback, but only 17.8% of your total investment. On the other hand, at 5% and bets of $55 to win $50, you’d have been down $445, or 44.5% of your investment.
In either case, however, you are still very much alive. You have time to turn things around when a nice hot streak rolls around. Had you chosen a unit size of 20% and been betting $220 to win $200, this cold streak would have quickly burned through your entire $1,000 deposit.
Of course, the safer you play it when selecting a unit size, the less money you stand to make on your winning streaks, too. You need to find the right balance of risk to reward for you. If you are happy with small wagers and just enjoy having a little something on the game to root for, a small unit size like 2% or 3% of your bankroll might be for you. But if you want the chance at bigger earnings and are willing to take the risk, you might be happier at 10% to 15%. This can always be adjusted later if your bankroll management preferences change.
How do You put Your Units to Use?
Once you establish a unit size, use it as your base for every bet that you make. More importantly, stick to it. Because you chose a unit size that you were comfortable with, it should be easy to stick to. When betting on a standard line game, just use your standard unit size.
You can make modifications to your sizing based on the situation. If you are betting on a parlay that comes at a higher risk than most standard plays, consider betting just half of a unit on it instead of a full unit. On the other hand, if you have handicapped a particular game that is your favorite on the board, use two units on it. Try not to put too much of your bankroll on any one play. It is too risky. Also, don’t feel like you have to limit yourself to just one unit on your favorite plays.
Units can be adjusted based on bankroll milestones, too. For example, you decided on a unit size of 10% of your total bankroll and deposited $1,000. This makes your average bet size $110 to win $100. You could set milestones to reassess your unit size at $500 and $1,500. If you get to $1,500 with a series of wins, you could reset your unit size to 10% of your new total bankroll, which is $165 to win $150.
Conversely, if you fall to $500, you could extend your bankroll by resetting the 10% to $55 to win $50. This method will keep your unit size accurate based on whatever your bankroll happens to be.
You can also adjust your unit size based on what type of bettor you are. If you enjoy betting on parlays and long shots that are harder to hit, pick a smaller unit size since you may go longer stretches of time without a win during a cold streak. If you tend to bet on heavy favorites, you can pick a larger unit size since your winning percentage will be higher. This makes cold streaks less likely.
The important thing is that you are thinking about bankroll management. This is regardless of what you settle on as your preferred unit size and betting style. Survival is a big part of the long-term battle. If you can stay within your means, you can ride out that cold streak until the hot streak comes and turns things back around.