A guide to bankroll management in sports betting

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From smartphones to tablets and wearable devices to PCs, it’s never been easier to bet on sports on the internet. But with ease of access comes the need to bet responsibly. One important aspect of responsible online wagering is bankroll management. Continue reading to learn more about bankroll management, including what it means and how to implement it into betting strategies.

What is bankroll management in sports betting?

A bankroll is a financial resource, i.e., the money used to back something or someone, and a sports betting bankroll is the amount set aside for sports betting. Because most sports betting takes place online, a typical sports betting bankroll is the money deposited into a sportsbook account. Therefore, sports betting bankroll management is the handling and organisation of these funds to ensure that bettors stay within their financial limits.

The benefits of sports betting bankroll management

Whether you’re a seasoned sports bettor, an occasional punter or a first-timer, bankroll management should always be in play. As a form of entertainment that involves real money, sports betting needs to be accompanied by a self-applied set of rules. That way, bettors only wager affordable amounts of money under certain conditions and over a given timeframe. Some additional advantages of sports betting bankroll management include:

• Limiting “house” wins - they say the house, i.e., the casino or sportsbook, always wins. That’s because most bets are structured by the house in a way that maximises profits and minimises losses. A set bankroll management plan can help bettors reduce the amount that the house can potentially gain.

• Eliminating emotional betting - when it comes to sports betting, it’s best to leave any emotions at home. That means bettors should avoid wagering on their favourite teams or players. Effective betting bankroll management can prevent overreacting to a loss or win by capping losses at an amount or a number of intended bets.

• Separation of funds - by keeping betting funds and personal capital (rent, savings, living expenses, etc) separate, bettors can ensure they can always cover the most important costs. This further boosts the benefit of avoiding emotional betting behaviour.

Risk of ruin in sports betting

One additional benefit of robust bankroll management is avoiding the risk of ruin. The risk of ruin is the probability of an individual losing it all or substantial amounts of money. In a sports betting context, risk of ruin is a phrase used to describe a situation where a bettor loses their entire bankroll.

Poor bankroll management is almost always the single most important contributor to the risk of ruin. That’s because the more you bet in relation to your bankroll, the higher your risk of ruin whenever you face inevitable losing streaks.

As there’s always uncertainty involved in future events, concepts like “sure wins” only exist in arbitrage betting. Therefore, most responsible bettors only bet between 1% and 5% of their bankroll on a single wager, with most bets ranging between 0.5% to 1.5% of their current bankroll.

Tools for effective bankroll management

If you need help making better wagers, you’re in the right place. Below, we’ll discuss some of the best bankroll management strategies and those that should be avoided. That way, you can use sportsbooks like Wildz Sports with the correct plan in place.

Applying better variance to betting

With a €100 bankroll, Granny might decide to flip a coin with a friend for €10. In the worst-case scenario, her bankroll could be gone after just ten coin flips.

However, if she applied better variance to her bankroll management strategy, she could flip for €2.50 instead with the same bankroll. This would allow her to theoretically lose 40 coin flips in a row before any potential risk of ruin. Not only does this variance buys her time, it allows her to bet and lose without going broke.

Using betting unit strategies

One step beyond variance is the use of betting units. A betting unit in sports betting is a measure used by bettors to regulate their betting performance. As betting only between 1% and 5% of a bankroll is considered best practice, 1 betting unit for Granny’s €100 monthly bankroll would be any amount between €1 and €5.

The aim of a betting unit is to make all bets consistent in nature, regardless of their specific currency amounts.

Betting units are part of what is known as a flat betting approach. That means betting the same amount, i.e., a flat value, on every wager. That way, Granny can easily manage her betting bankroll by knowing she’ll only wager on average 5 units per week regardless of whether she’s on a losing or winning streak.

Implementing variable betting units

Of course, there are exceptions to every rule. When it comes to betting units, this exception means using variable betting units. Usually, employing variable betting units comes with a degree of confidence (or lack thereof) in a particular bet.

For example, in next season’s Champions League, Granny might choose to lower the value of 1 betting unit on a wager on Aston Villa @ 41.00 (+4,000) winning the tournament to €1. Similarly, she might want to increase the value of 1 betting unit for wagers involving Real Madrid @ 2.5 (+150) to €10.

While using fixed betting units is encouraged, there’s always a time and place for variable betting units. But what are the best methods and tools for calculating how much to wager on each bet?

Harnessing the Kelly Criterion

In sports betting, the Kelly Criterion (f) is a mathematical formula used to calculate how much to wager in a given bet. The main benefit of the Criterion is that it’s designed to maximise returns over time. Also known as the Kelly strategy, Kelly bet or Kelly formula, it looks like this:

f = (pb-1) divided by (b-1)

p = estimated probability of winning b = decimals odds f = recommended bet size that is changed to a percentage (for example, 0.02 → 2%).

For example, let’s imagine that after Real Madrid signs Kylian Mbappe, Granny estimates that Real Madrid now has a 45% chance, i.e., a 0.45 probability of winning next season’s Champions League, compared to the sportsbook’s implied probability of 0.40, i.e., at odds of 2.5 (+150).

Using a €100 bankroll and the Kelly Criterion, she calculates below:

((0.45 x 2.5)-1) divided by (2.5-1) = 0.0833

Based on the formula, Granny should stake 0.0833, i.e., 8.3% or €8.3) of her bankroll on Real Madrid winning the tournament. So now, the best suggestion is 8.3% of Granny’s bankroll. In reality, 8.3% is aggressive bankroll management and not really optimal if she wants to reduce her risk of ruin. That’s why bettors tend to add a divider of at least 5 that reflects their desired risk level and confidence in their probability estimation. That way, we get a much more sensible bet size suggestion:

0.0833 divided by 5 = 0.0166, i.e.,1.66% or €1.66

While the implied probability of losing is larger than the implied probability of winning, it remains a bet with a positive expected value due to the suitable odd sizes.

By using the Kelly formula, it means the overall returns should be higher in the long run, and the overall losses will be lower. But it’s worth pointing out that the Kelly Criterion only works if the probability estimations are accurate. If not, Granny could end up betting way too heavily in slightly profitable or even losing situations."

Bankroll management methods you shouldn’t use

First up is the world-famous Fibonacci sequence. If you haven’t seen it before, it goes as follows:

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, and so forth.

Starting with the “0” and “1”, the logic is that you use the sum of the previous two figures to generate the next one.

In a sports betting sense, the first step is deciding the value of your stake and betting unit. For example, for a bettor named Jack, 1 betting unit equals a €10 stake. Therefore, 2 units equal €20, 3 units equal €30, etc

Now, following the Fibonacci sequence from 1, the first bet would stake 1 unit (€10). If Jack loses the bet, he’ll move one step to the right and bet two units (€20). If he loses again, he’ll bet three units (€30), then five units (€50), and so on. However, if Jack wins a particular bet, his next move would be two steps to the left and bet fewer units than the previous wager.

Because the Fibonacci betting system is a negative progression, Jack will need to raise his stake after each loss in order to theoretically recover the money he’s just lost. In other words, he’ll need to chase his losses by risking more money.

While it might seem clever in theory, the Fibonacci sequence can get out of control quickly if bets don’t go Jack’s way.

The second bankroll management method you should avoid is the Martingale strategy. Although there are many variations of the Martingale system, the classic version “works” by doubling the initial stake after each loss but only betting the base stake after each win. So, in Jack’s case, it would mean betting €20 after every loss and €10 after every win.

As a negative progression, i.e., betting more as you lose more, the Martingale strategy is similar to the Fibonacci sequence. But in this case, after each loss, the bet doubles compared to the previous bet. In conclusion, the exponential growth of bet sizes in losing streaks is what makes these systems potential bankroll killers.