|
Gibbons' Sports Money Management Sports Betting As An Investment Proper money management is crucial if you want to maximize your profits from sports investing. This is why I have spent considerable time on examining the whole concept of sports money management. The first rule of investing is to not lose your capital. The second rule is to not forget the first rule. Because risk avoidance is my primary objective, I recommend that you bet about 1-3% of your total bankroll each day with 1.5% a good value. All of my Best Bets are 1-10 units each except my Vegas Rotation Late-Game Plays which are 6-30 units.We naturally have occasional losing streaks, and you need to be prepared for them both monetarily and psychologically. If you start your subscription just after a losing streak, your profits can be substantial. If you start your subscription at an inopportune high net unit point, you might not show a profit for months. The starting point of any investment is critical, and this is particularly true of sports investing. 80% of the time, my plays are one unit. However, there are occasional high probability situational patterns that justify multi-unit plays. Your "unit" size will obviously be a variable based on the size of your bankroll. Because we are investing 1-3% of our bankrolls most of the time, we are constantly betting a fixed percentage of our capital. This automatically allows us to bet more dollars when we are winning, and less when we are losing. Because of winning many more units than we lose and the power of compounding, we will see our capital grow at a semi geometric rate over the long term. Keep in mind that there are other effective ways of managing your bankroll including betting a fixed amount of your bankroll (say $100.00 per game) regardless of the increase or decrease in the size of your bankroll due to profit/loss as the year progresses. This strategy might be followed for a year for example, and then adjusting your bet size based on the net results for that period of time. This method can be shown to outperform a fixed percentage strategy most of the time. However, we have found clients are more likely to stay disciplined if they are betting more as their bankroll grows, and are usually unwilling to stay with betting a fixed dollar amount per bet. You must calculate the dollar value of a Unit relative to your bankroll My Best Bet results are in Net Units won or lost, which is actually a won/lost record that includes the vigorish and betting lines. Therefore, your individual results should be nearly identical to mine on a Net Unit basis. The dollar size or value of your "unit" will vary depending on your risk parameters and the amount of your capital. When I issue my Best Bets, you must allocate the dollars you are putting at risk each night on a proportionate or fractional basis. You must make some multiplication and division calculations if you want to allocate your capital on a proper ratio basis to reflect the number of plays and lines.
The graph above shows my most recent performance history (note that I have over a ten year performance record). The blue line is the long term historic running total of Net Units won, and the red line is a 200-day moving average of the sum of the Net Units. I use a 200-day moving average because it is a solid indication of the long term trend of Net Units won. When the red line (200 day moving average) is rising- it means we are in a long term uptrend and that we are on a long winning streak. My handicapping results show a positive expectation (I win). This allows me to know that any deviation or losing streak that takes me below the mean (the moving average) will not last. I will start a winning streak 100% of the time after a losing streak. Notice that when the blue line is substantially above or below the moving average, it tends to regress to the mean. That is, if I am on a losing streak, results will tend to come back to the moving average. Note that by the same logic, if the daily running total of Net Units won is substantially above the moving average, there is a tendency to pull back to the red line as well. This is called mean-regression in statistics. Everyone has losing streaks, and since I use a systematic approach to handicapping, I have a normal variance in results. Most sports investors underestimate the length and severity of any losing streak. Because of this, they also underestimate the amount of capital (bankroll) they will need to weather the storm and be successful. My view is that you need to have enough capital to withstand at least a 10% loss (drawdown) in running Net Units from the most recent high equity point achieved. This provides an additional cushion if we should lose more than our average historical drawdown which is 6.9%. (Note the recent historical drawdown percentages labeled on the chart). Randomness of Results Very few people understand the large amount of randomness in any handicapper's results. In fact, there is a large amount of randomness in virtually every human activity. A poor handicapper can have a winning record for years because of sheer randomness, while a good handicapper can have a losing record for years because of randomness. Many people are impressed with winning records that are actually based on pure luck.Because we are stock, bond, and futures trading system designers, we are aware of the importance of randomness in results. To avoid thinking that our good results are strictly a result of our brilliance and not some randomness, we know we must have a positive statistical expectation (you must have an edge). Our systems are back-tested and walked forward on data that was not used in the design of the system. In other words, we have a proven edge that existed in the past and that edge has produced similar results in the present. But even with this, we can have long winning streaks and losing streaks that are to some degree random coupled with a normal variance of results. Very rarely does a handicapping system perform as well in the future as it did it the past. That is why we are constantly working on our methods to achieve the highest reasonable return without taking undue risk. Do not be overly impressed with short term winning streaks (a few days or weeks) as this proves nothing. It is long term performance that is important, and very few handicappers have a long term winning record. We do. You must do the following five things if you want to have any chance of success: High Probability Situational Patterns Myself and my clients always take full advantage of the rare days when all of my systems and money management programs are in alignment. Here are four of those days:
|
