I recently wrote about the comparison between two popular staking plans: flat betting and the Kelly criterion. Subsequently, I read on the Internet some posts, which misinterpreted the two plans and mentioned ideas that are simply wrong. That is if a player really wants to come out a winner from sports betting.
In fact, one suggestion was supposedly correcting the other. I realized that for most players it is not clear what exactly happens when betting online.
Let’s see 6 bad ideas – and ways of thinking – for a staking plan and why these are wrong:
1. Betting as percentage of capital is the best system, because we can increase our bets as we win, while we can decrease them accordingly when we lose.
The rationale behind this suggestion is that if the player has a profit, the stakes grow so that future profit will be greater. Conversely, in case of loss and capital reduction, the stakes get smaller so there is less damage. Theoretically, the good thing in this idea is that we will not ever suffer complete loss of capital. Theoretically at least.
However, the bad thing is that nobody guarantees us that after 10 winning bets would not eventually be followed by 10 losing bets, so after increasing the bet, we will end losing more than we have gained. Betting as a percentage of capital is appropriate and proved the best only under certain conditions – for example when there is a value bet.
2. When I compare the performances of two staking plans in 10 matches, it eventually comes out that flat betting gives better performance – so there is no absolute rule.
I highlight three mistakes in this sentence. The first and main error is the very small sample of bets which are being compared. Even 100 games are not to be considered a large sample if we want to draw safe conclusions. Additionally, the best bet – if a strategy has proven to be profitable – is NOT flat betting. And finally, well, yes, there are indeed absolute rules in mathematics and statistical analysis.
3. If the maximum drawdown is 10 bets, then it pays to adopt the percentage betting system.
The drawdown is useful in ensuring a healthy capital, in order to cope with those difficult moments when we will be temporarily in the red. But even with 50 bets drawdown our system may still be profitable. Think of betting on odds of 100.0, while the real probability is 10 percent. We could indeed lose 50 bets, but on the next 5 we will earn 500 bets if the probability is proven true.
Value betting (10 percent probability and 100.0 odds is a huge value) is the correct method of betting. The drawdown has nothing to do with the performance of the betting system. Consequently, our staking plan will depend on the performance of that system; specifically, if this actually yields profit, which has little to do with the drawdown.
4. The flat betting staking plan increases your chances of winning when you play more games.
The chances of a system to be profitable indeed increase with a larger sample. In fact, better conclusions will be drawn when we bet the same amount of money per pick, because the constant increase and decrease of stakes do not help in this direction. But the chances to emerge as winners do not increase because we play more games, but because the betting system’s confidence interval grows as our sample gets larger. Our chance to win half of the games, when the actual probability is 40 percent, will diminish the more we bet, approaching the 40 percent level.
5. The Kelly criterion serves only when a system wins over 50 percent.
50 percent of what? Are you talking about the win/loss rate? To win half of the bets? And at what odds? If, for example, we earn 30 percent on odds at 4.0, shouldn’t we use it? Or maybe you mean a return-on-investment of 50%. Well, if there is such a system which keeps recording returns of 50 percent on turnover, I’d love to know!
6. Stay away from Kelly criterion in football betting.
The reasoning behind this suggestion is that we cannot really ever find an accurate probability in football. The issue of course here is that, in fact, we all estimate some kind of probability for the three possible outcome of a football game subconsciously. Even reading sports newspapers and deciding to place a bet at 2.00 odds, we automatically assume, even subliminally, that we expect to win more than 50 percent.
Now the question is how close to the real probability is this assessment. Apparently, what we all try to achieve in sports betting is to make the best estimation of true odds. That said, the avoidance of football betting as the most unpredictable sport in regard to statistics and the preference of other sports such as horse racing, where that estimation is reportedly easier, is a question which I would rather not discuss now. I would simply say that all sports have their characteristics and their methods, in order to estimate the true probability of a result.
If any of the above ideas rings a bell, I would suggest rethinking.
Online betting and, of course, making money out of it is already difficult as it is. Let us not make it worse with egotism. The worst way to bet is to get trapped in your own mindset and not hear other people’s views. Money management not only requires knowledge and discipline, but also assumes at the outset a right way of thinking, which is not characterized by the above misused ideas.