All Dollars Are Not Created Equal

[PerpetualCzech]

This is a principle that lies at the heart of any discussion about money management - not just regarding gambling but in our everyday lives as we accumulate wealth and try to find a balance between spending now or saving for later. Let me start with a thought experiment to try and explain what I mean:

Say you are an average income earner and all of a sudden have just won a lottery for 10 million dollars. You cash the cheque and now have the money sitting in your bank account. Now, Bill Gates comes up to you and offers you a proposition: flip a coin - if it comes up heads you give him 10 million dollars and if it comes up tails he will give you 20 million dollars. Would you go for it? I doubt anyone reading this would but let's try and think about why. I mean, if the stakes were lower - say risking 1000 to win 2000 - then no one would dispute that it is a good bet for us. How can a game with the same positive expectation rate be good for one size of bet and not for another? Or alternatively, how can a bet with the same terms be good for one person and not for another? (For example, Bill Gates should certainly play the game if it were offered to him given that he has a net worth of over 10 billion ...)

The answer lies in the fact that the value of the units that you are risking and trying to win vary depending on how many you start with. Let's take the extreme ends of your bankroll in the proposition above: the last 1000 dollars that you would win in the proposition above (out of your final bankroll of 30 million dollars) is almost worthless to you compared to the last 1000 dollars you would lose (out of your final bankroll of zero), which is so valuable to you at those low levels.

That is at the heart of the balance we are looking to strike when we manage our money in both gambling and in our daily lives. We may face a possible investment with positive expectation but we need to decide how much out of our bankroll to risk on it: too high and we risk eroding our bankroll so that we have not enough left to take advantage of future investments but too low and we give up an opportunity to maximize our profits.

The Kelly Betting system shows the variables we need to consider when we make these decisions in sports betting: 1) How likely it is that your bet will hit and 2) What are the odds that you are being offered on it. For those interested in the formula for Kelly Betting you will find it here:

http://www.madjacksports.com/forum/showthread.php?s=&threadid=37879

Caution: For reasons explained later in the above thread, I believe Kelly dictates risk amounts that are too high for betting on sports. I believe they are appropriate however for games where it is possible to figure out mathematically the exact chances that your bet will win (which is not possible in sports betting)

 

[PerpetualCzech]

On a related side note, I've recently seen "flat betting" discussed here - some people like to play the same amount for each game while other vary their bets according to how strong their play is. We can think of another thought experiment to show why it makes sense to vary.

When trying to think about a thought model I often find that it helps to think of an extreme situation - even if it could never realistically happen - and then apply its extension to the "real life" scenario. Suppose some crazy bookmaker offers you the following odds:

Tampa Bay (Anyone) -110
NY Yankees (Clemens)-110

I doubt anyone would argue that proper money management techniques would call for a much higher percentage of your bankroll. By looking at an extreme example like this you can see that the better price that you get for the bet, the higher your risk amount should be. You can map this onto situations when the edge you have is smaller - you still have to vary your bet, just by not as much, that's all.

Another example: any blackjack betting system calls for increasing your bet when the deck is more favourable for you. This is at the heart of any blackjack strategy: the higher the count, the higher you should bet. It's a good example of showing that when you are playing a game where the advantage to you is variable, a higher advantage requires a higher bet.

The same principles apply to sports betting except that we are working with a big disadvantage: unlike blackjack, it is very difficult to assign a number to any possible advantage or disadvantage that we are working with. kcwolf made a post in another thread that suggested flat betting for any novice sports bettor. That makes sense to me but for a very important reason: with no record to refer to, you have no way of rating your skills to be able to estimate what kind of an advantage (or disadvantage) you are working with.

I recommend to anyone who is betting for serious profit not only keep track of their wins and losses but also to keep track of their *volumes*. After a good sample, say over 5000 bets, divide your profit or loss by the total amount that you have invested. This will give a very good measurement of your betting skills/judgement. If you show a positive return then you almost certainly can trust that you are betting with positive expectation and you can then start varying your bets according to the odds that you are offered. The better the odds, the higher your bet should be!

 

[Spock]

very nice writeup. What ya say is true.

I usually bet the same amount on most games. If the game really stands out I will bet higher. I have also cut down betting on parlays as in the long run I am getting hurt by them.

Max parlays I am sticking with is 2 team parlay.

I started with a very small amount and thru patience and luck on the games that I bet big (as compared to total bankroll) I am up a lot %wise. Have locked in most of my profits and have started fresh.

I wanted to know ur views on this - lockin in ur profits and starting fresh again from a prefixed amount. Or should u keep in the money and increase wagering amount. (I do realize that in the end it is what ur comfortable wagering on each game).

Thanks and Cheers !!!
Spock

 

[PerpetualCzech]

I think this depends so much on your personal situation - I don't think there is any one right answer that applies for everyone. Everyone needs to decide what part of their overrall net worth they can allocate to their betting bankroll. 2 factors to consider that pop to mind:

Living Expenses - The higher your expenses per time period the lower your bankroll should be (and vice versa of course) For example, maybe you've just paid off your mortgage (increase your bankroll) or have a baby on the way (decrease it)

Experience - The more experience you have the better idea you have whether you have good enough betting judgement to make a profit in the long run. If as you progress you are finding that you are losing then I think you have to cut down the size of your bankroll and if you are grinding out a profit then you are justified in increasing it.

Feel free anyone to add to this list if you think of something.

 

[MadJack]

i've seen arguments on both sides of this and i'm still not convinced that betting the same amount per play isn't the best way to go. for sports betting, that is.

occasionally i'll make a larger than normal bet on a particular game, but for the most part, i bet the same on each game.

the blackjack analogy doesn't work for sports betting and neither does the clemens-110 vs. tampa bay (where are you going to find that?).

hopefully, somebody can come in here and prove that i have been missing the boat. i've been doing this for over 20 years and have nothing in my records to show that i have a higher advantage when i play more on the game that i happen to 'like' better.

it's either a play for me or it isn't.

no, i'm not a pro.
no, i can't make a living at this.
yes, i'm always learning and am open-minded.

 

[PerpetualCzech]

Sure the Yankees example would never happen in real life but I think it is a thought experiment that shows flat betting may be wrong.

Let's say we decide fair odds for this game are -300. Or -250, -220, -275 ... doesn't matter what exactly but anyone reading this will agree that fair odds will be far below -110. Well, if odds of -110 warrant a bigger bet then surely all the ones in between do as well to some extent, no? I mean, you can't expect that there is some magic point in the middle that all of a sudden warrants a big step up - the curve to get to the "-110 point" *must* be a gradual one.

I know this is all very unspecific and I am not suggesting that we can reasonably calculate our bet amounts like this to any degree of precision, all I am trying is to show by way of an extreme example where it is clear that our bet must go up that the points in between must gradually increase the bet size as well.

I think the blackjack comparision *is* valid, too. Betting on a baseball game, a flip of a coin, the turn of a friendly card - it doesn't matter what the event is but the principle is the same: try and take advantage of expected value. The description of the event (i.e. *how* the event produces the relevent result) I don't think matters when you consider your wager size (or if it does, I would like to know why anyone thinks so)

 

[Progno]

I started a thread asking WHEN would be a good time to raise a bet if the previous bet on the same team lost. I got no discussion about it at all.

Now of course I am fully aware that any team whatsoever can streak. But using your logic (some very good logic ) wouldnt there also be a set of parameters that would be favorale to raise your bet when losing?

For example, the 'odds' of Atlanta losing 3 straight games at home to Detroit might be 15-1. I am not a statistician, just making an example. Wouldnt a 1-3-7 unit increase, assuming even odds, warrant raising your bet? If you found these circumstances over a period of time, statistically you would come out ahead?

Sorry if this seems off your subject, but in my mind it is just another example of why it would be beneficial at certain times to vary your bet

 

[dngu047]

PerpetualCzech, I'm not convinced the thought experiment validates the concept of varying bet size. If you want an extreme example, if you get Yankees +1000, Tampa -20000 of course you plonk a large one on the yankees. However, this doesn't really help because in reality we're talking about very small advantages. For example, your strong play might give you a 57% advantage instead of a 55% advantage. Is this really enough to justify an increase from say 1 unit to 2 units and, more to the point how can you be confident enough to accurately categorise plays when the differences are so small?

 

[topspinner]

I can only speak as to my personal betting history. I generally play the same amount on every game (1x-2x). However, between 5 and 10 times a year, I see plays that that are out of the ordinary and I think have at least an 80% chance of winning. On those plays, I will play anywhere between 8x-15x my normal bets. Over the years I have hit about 70% of these plays. However that said I don't believe varying the size of your plays on a daily basis is a good idea. But if you hit your spots and wait for lines or props that are way off, it be quite profitable. I am a small player, so even betting 15x my normal bet is not that huge of a bet. This betting strategy has worked for me, as I have not had to make a deposit in two years and have had several withdrawls.

 

[ndnfan]

Pretty much agree with dngu047. How can you justify varying your bets from say 1-5 or 1-10. For example, If you're thinking that say a 1* will hit at 54% and a 5* will hit at 65%, how do you justify betting 500% more on something that just gives you a 11% expected advantage?? :shrug:

I just can't comprehend the thinking on this?? I keep hearing from people that this stragedy comes with experience and I'm sure plenty of people have success doing this, but I just think if you feel each play(whether 1* or 10*)is gonna hit in the positive % over the haul, why even bother varying the bet?? No one knows when a losing skid's gonna hit, we all have them. I guess people feel they are maximizing their money varying bets and all, but I just feel if you have the proper bankroll, there shouldn't be a need to do this.

I don't claim to be an expert on this and I know a lot of people disagree with me, but I just thought I'd throw my opinion out on this.

 

[Spock]

I agree with ndn ..

Going through the up's and down's name one thinks and tries to reason out what was the good thing and wrong thing that was done.

I bet almost same amount on all bets (unless something really strikes out - like the Over in Game 3 of Lakers but this is hardly 1-2 times a year and I will double my usual bet for these). But If I pick 5 plays and bet 10 times my usual bet money on one play then why play the others. Bcoz this is sports and in the end anything can happen like Celemens getting hurt yesterday in 5'th inning and Yankees giving up 8 runs in the 7'th inning to lose.

So If all games are not worth playing with same money why not just pass on the lower games and play only the 10* one.

Fortunately I have not lost money in sports betting in last 1.5 years but i look back and see plenty of mistakes I did. The best thing I did i think so far is to have a good moneymanagement understanding. In my case I had no choice since my bankroll was very small to begin with and I still keep small since I make withdrawals every now and then.

Its good to know the opinions of everyone. I think along with moneymanagement the biggest asset one can have if one has to make money in sports betting is PATIENCE.

If one can be patient then he is already ahead in the long run for sports betting. Patience and knowing when to pass on games. Not betting only for the action.

My 2 cents.

Cheers !!!
Spock

 

[nostromo]

if you feel each play(whether 1* or 10*)is gonna hit in the positive % over the haul, why even bother varying the bet??

agree with ndn here...

Let's say you're an experienced bettor with an extensive record to refer to. You're using 1-5 unit plays and your record shows they all make money over a season - then you would be better off by making them all 5 unit plays. If 1 or 2 unit plays don't bring the $$$, why bother taking them at all, even for 0.1 unit.

here's a good example: JT Sneaks' NBA record from around New Year

One Unit Selection:
YTD: 58-45, +17.10

Two Unit Selection:
YTD:87-58, +48.50

Three Unit Selection:
YTD:52-43, +11.10

Four unit Selection:
YTD: 13-2, +43.20

1 unit plays were hitting at a better clip than 3 units and made more money despite being much smaller.

In the long run, only big bets will matter if you vary your stakes too much anyway.

 

[PerpetualCzech]

Progno,

What you are proposing is a variant of the dreaded Martingale system where you keep doubling up every time you lose to try and lock in a profit. Most of the time you will come out ahead but the time that you losee you will be wiped out. The system assumes 2 things that you never get in real life: an infinite bankroll and no betting limits imposed by your bookmaker. Considering your recent preformance to determine your bet size is a major mistake, IMO - in general they are completely independant from each other.

dngu047, topspinner, ndnfan, Spock, nostromo,

I should have maybe emphasized that the Yankee example was only a theoretical model that showed a bigger edge required a bigger bet, but I agree that for the purposes of sports betting the increase often isn't enough to worry about. Say you have decided to play 1 unit on a line of -160 and all of a sudden you see a better price at -155 somewhere, well, then keeping your bet at 1 unit is not a major mistake there. But like topspinner I too come across lines that I feel are way off every now and then and in these cases understanding the higher-edge-higher-bet principle is an important one. Also, the more experience a profitable handicapper has is the best kind of evidence to have in rating his handicapping abilities. So a long term winner I think is in a position to make small increases in his bets when he feels he has a higher edge ... maybe not from 1 to 2 units in dng's example but perhaps from 1 unit to say, 1 1/5 units.

Thanks for the feedback - I feel these are some of the most important concepts to be thinking about for us!

 

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