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Sports Betting Money Management

Sports betting money management

A good money management helps sports bettors protecting their bankroll over the long term

Successful betting is about identifying value bets and mispriced opportunities on the betting market. But once we identify probabilities and the value bets, the question is how much we should bet on a particular game.

No matter how skilled we are in identifying value bets, sports betting is still a game of probabilities and every sports bettor must protect their bankroll. Sports betting money management is one of the most important parts of profitable sports betting.

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What is sports betting money management?

Sports betting money management tells you how much money to bet on an individual bet. It is a betting strategy that helps sports bettors protecting bankrolls and staying in the game until they reach their goals.

If sports betting is exciting, you are probably not making any money. Profitable betting is boring and this is where money management plays a crucial role.

Sports betting is trading money for more money, wherein the short period variance and losing streaks are inevitable. Being too aggressive will lead to a loss of a bankroll. This is why every sports bettor must know how to manage money and look at sports betting as a long-term process,

What percent should you bet?

A recommended percentage from professional sports bettors is around 1% per bet and no more than 5% of available betting funds, which is very aggressive and should be used in very rare big value bets occasions.

If starting bankroll is $10,000 recommended bet is $100 and no more than $500 on exceptional value bets with bigger probability of success.

Betting strategies and money management is also influenced by your:

  • betting experience
  • betting knowledge
  • overall financial knowledge
  • wealth and other investment portfolios
  • age and personal risk tolerance
  • goals
  • size of a bankroll
  • odds played

The situations are not the same for all sports bettors. Young and rookie bettors may start with smaller bankrolls, they are willing to risk a little bit more. If they start with $1,000 as a starting bankroll, then recommended bet is $10, which is not that attractive and many young bettors take a bigger risk and play bigger percentages.

On the other side experienced bettors with bigger bankrolls are more careful and can play even less than 1% per bet. Successful bettors look at sports betting as part of their investment portfolio and in some cases, their bankroll is just a percentage of their overall and bigger portfolio. One bet in this case can be much smaller compared to the overall portfolio.

Expert bettors with a big sample size of bets and a well-defined sports betting system that has the proven edge against the market will have different risks and calculated stakes based on probabilities.

Stake sizes must be also defined by the odds. The bigger the odds we play on average, the more losses we can expect. The smaller the odds we play the more wins we can expect in a row. Of course, this W-L record has nothing to do with the profit alone. No matter if you play big odds or low odds without betting on value, you’ll lose in the long run. But to survive short-term streaks, the odds must be taken into a consideration.

Sports betting investment

The majority of sports bettors and gamblers are focusing on how to win the next game or short-period runs. It is in most cases a game of luck. Many of them don’t have any money management and long-term approach. More than 95% of all bettors lose and have a negative lifetime betting balance.

A small minority of successful sports bettors take a different approach, where they look at betting as an investment and not as gambling. They divide their bankrolls into small parts, bet only a small percentage on well-selected value bets.

The difference between sports gambling and investing

The key difference between sports betting as an investment and sports betting as gambling is diversification. Investing is about bankroll management, betting smaller stakes, and spreading your risk across more bets. Whereas gambling is ignoring money management and simply betting bigger percentages (or all) on single bets with no loss reduction strategy.

Can betting be a form of investment?

Yes, sports betting can be a form of investment, when:

  • you look at betting as a long-term investment
  • you establish a well-defined betting system that has the edge against the market
  • you stick to money management

Sports betitng investment features

How to manage betting money in portfolios?

Set financial goals with the focus on overall wealth and build investment habits. Use sports betting profits at the start as a channel to increase your investment portfolios. Sports betting is considered a high-risk investment, but with potentially bigger ROI (return on investment). Therefore it is recommended, that sports betting is just part of your bigger and diversified investment portfolio (stocks, real estate, bonds, bitcoin, and crypto,…). Remember that betting everything on one single bet, only one asset or only one industry is always risky.

What is the difference between sports betting bankroll and a budget?

A budget is a money for sports betting activities that you take from your regular income stream. A bankroll is money for sports betting activities once you stop taking money from income streams. Bankroll is a locked fund that is affordable and can be lost without any serious consequences. Most sports bettors start with a budget, but the goal is to take profits and build a bankroll that can be untouched for a year or even more.

What does 1U (1 unit) mean in betting?

A unit in sports betting is the size of a given bet and it represents the percentage of a bankroll. Everyone starts with different bankrolls and because of that, the stakes are calculated as the proportion of the bankroll. 1 unit is typically 1% of starting bankroll, though is not the same for everyone.

With the units, sports handicappers communicate and easily compare relative results compared to their bankrolls.

For example, if 1 unit bet is 1% of a bankroll:

  • 1 unit for a bettor who starts with $10,000 is $100.
  • 1 unit for a bettor who starts with $5,000 is $50.

What does 5u mean in betting?

5u in sports betting is 5 units. 1u is multiplied by 5, which means, that if 1 unit is $100, then 5 unit bet would be $500.

Flat betting

Flat betting is the simplest form of money management in sports betting. This is a disciplined betting strategy that means you are wagering the same amount on every bet either until your reach your financial goal, or for some period of time.

This model of money management is recommended for rookie sports bettors who bet without bet research or don’t have yet established a sports betting model, which is an important part of finding the value and determining dynamic stakes.

A bankroll must be reviewed manually after some period of time or after you reach your financial goals. After this period the flat stakes are re-calculated.

Flat betting example:

  • Starting bankroll: $10,000
  • Every bet is $100
  • All losses and wins go back to bankroll
  • Until you reach $12,000 (example 1)
  • Betting $100 for one year (example 2)
  • Then re-calculate another flat unit and start again

What is the advantage of flat betting money management?

It is simple and less risker than most other betting strategies.

What is the disadvantage of flat betting money management?

With a flat strategy, all bets are the same no matter how big the bet value is and because of that, we miss part of the profits. Every sports bettor wants to bet more, when there is more value and less with smaller value and this is not possible with flat betting.

Another disadvantage is more psychological because most sports bettors want quick profits and with flat betting profits are slow. This leads to higher stakes and putting players in an extremely risky situation.

Kelly criterion strategy

A kelly criterion is a money management formula that helps sports bettors to calculate an optimal bet size, which represents the percentage of your bankroll.

The formula is very popular among professional gamblers and sports bettors because leads to higher profits and this is a big advantage of other strategies in the long run.

How is Kelly formula calculated?

The kelly formula for sports betting is calculated from bookmakers’ odds and the probability of winning.

The formula: f = (b*p – q) / b

  • f = the fraction of the bankroll to bet
  • b = the decimal odds – 1
  • p = the probability of winning
  • q = probabiloty of losing = 1-p

Example:

Let’s say that the probability of winning is 0.55 and offered odds are 2.50. We want to estimate recommended bet size based on the kelly formula (f = the fraction of the bankroll).

  • b = 2.50 – 1 = 1.50
  • p = 0.55
  • q = 1 – 0.55 = 0.45

f = (1.50*0.55-0.45)/1.50 = 0.25%

You should bet 25% of your bankroll based on this formula. However, betting too much will put your bankroll at risk, and because of that sports bettors use the adjusted or fractional kelly criterium formula.

What is fractional kelly?

Fractional kelly is a bet size calculated from a kelly formula but adjusted to lower stake with the intention to protect bankrolls and avoiding betting too much on single bets.

If the recommended stake is 25%, adjusted 10-percent kelly would be recommended bet of 2.5% per game, instead of 25%.

Positive expected value

The beauty of the kelly formula is that works only for bets if there is a positive expected value.

What is a positive expected value in sports betting?

A positive expected value is when the probability of winning a bet is higher than the implied probability of the odds. Every sports bettor should only place a wager where positive expected value exists because this is the only winning strategy that really works. Kelly helps us to identify value bets and which bets are good enough to play. This means, that the odds must be high enough to compensate for the risk.

What is the disadvantage of kelly’s money management?

The formula works only if you can accurately project the probabilities. Most sports bettors don’t have an established predictive sports betting model to predict the winning probabilities and because of that kelly will not work.

The proportional betting strategy

The proportional betting strategy is calculating a bet size every time before you place a wager. If you decide to bet 2% per game and your bankroll is $10,000, the first bet would be $200. After all the losses and wins are returned to bankroll, you must re-calculate the size of a bet again.

For example, if you have now $10,800, your 2% bet is 0.02*$10,800 = $216!

What is the advantage of proportional money management?

The advantage of this strategy is a higher return on investment during winning streaks. Based on theory winning proportional strategy will outperform flat strategy.

What is the disadvantage of proportional money management?

Once the losing streak hits, the wagers will decrease and it will take much more time to come back to the point where you were before a losing streak. Bigger variance, higher risk, and extra stress are the results of this strategy.

Martingale betting system

The martingale betting system is doubling your stakes after loss and then repeating it until you win a bet. The idea is to cover all the losses with the last bet and making a profit.

Does the martingale betting system work in practice?

No, the martingale betting system does not work in practice and it is not recommended by professionals. Four reasons why martingale doesn’t work and it is not recommended:

  • Sports betting has its own limits – which means that if you double your stakes after every loss, you may found yourself in a position where no bookmaker will accept such a big bet, that could potentially cover all your losses.
  • The limit of a bankroll – doubling stakes after losses can put you in a position, where you don’t have enough money for the next bet. Without “next” bet, martingale fails.
  • Gambler’s fallacy – many sports bettors believe for example, that the team will cover the spread after couple of straight fails. They believe that the probability of a random event occurring in the future is influenced by the past history, which means that they believe the point spread cover will happen for sure at some point. Which is not true, because every game is an independent event. In the theory the team with only 1% winning chance can win all games in the future versus a team with 99% chance of winning. Rising stakes is motivated by false belief.
  • The odds and the value – Martingale system is not betitng on the value and it doesn’t improve players’ odds.

Is the martingale system banned?

No. the Martingale system is not banned as such, but constantly rising stakes will eventually lead to the restrictions because every sportsbook has a limit when it comes to the max bet size.