Tipser.Aramis
10-09-2008, 02:02 PM
The average punter loose his money to the bookmaker largely as a result of poor money management. Bookmakers can from time to time present very good prices, espescially after the bookmaker has had a few good weeks (often weeks with surprise results, many favourites losing, etc), and punters' accounts are running empty. Bookmakers know that even if they present a few good odds (I mean really good odds), average punters will most probably deposit more money, and most certainly win this time, thereby increasing their bookmaker account.
This is fine by the bookie, because he knows that the customer most likely will have an empty account in a few weeks time due to his poor money management anyway. The bookmaker will see this loss as a short term investment, because the average punter will feel aroused by his winnings, he's getting eager, and start to bet more often and often with higher stakes. Unevitably, the bookie's getting his money back, with a solid interest on top.....
Profesional punters know that bookmakers operate this way, (presenting good prices every now and then, get money circulation, let the customer feel he's winning, thus generating more cash flow, and eventually more money in the bookmaker coffers), and therefore they wait patiently for the next round with extra good prices offered.
The profesional punter do not get carried away after a few wins. He knows what to expect, and acts thereafter. The profesional punter is not necessarily better to predict an events outcome than other punters , but he's definitivly much better with money management
1.Martingale
Martingale is probably the best known system for money management. Originally designed for use in casinos, this system has nothing to do with picking objects. Martingale is a system which helps you control your stakes. With Martingale, you can be a lousy bettor, but still win money. Please not that Martingale is a system with very high risk of going broke.
The principle of the Martingale system is as follows:
If you lose, you double your stakes, and if you win, you start all over on your starting stake. This means that you eventually will be ensured a profit. Follow this example: You've found a game with odds 2.0 for home victory. You bet 100$, but you lose, as the game ends in a draw. Next time you bet 200$ on a game with odds 2.0. If you lose again, you must bet 400$ on a game with odds=2.0. If you win this time, you've placed a total stake of 100+200+400 =700$, and you've won 100$ for your efforts. The 100$ payoff is equal to what you would've won on your first bet.
Fantastic system, or what ?
Certainly, if you had unlimited funds available. Or if the bookie would drop his maximum bet limit. Or if you have the sufficient cool when you hit a long losing run. Remember, with odds=2.0, you will have to wager 32 times your original stake if you lose 5 times in a row. And losing 5 times in a row is not too difficult with odds 2.0..... And even if you have lost 5 times in a row, you have no greater chance of winning the sixth time. Too many people think they'll have to win soon when they've lost many in a row. The fact is that the chances for a win is just as big (or small if you like) as when you started the betting sequence. Martingale is in other words a very dangerous system, and should be used by punters with large funds and no nerves. In my opinion, Martingale is not a suitable money management system for the average punter due to it's heavy level of progression
2.Row of numbers
The German word for this system is "Die Abstreichmetode". This is also a system well known from casinos, and has a lot in common with Martingale (recovering from losses by increasing stakes). But Row of numbers is not as tough as Martingale though. While Martingale can quickly give you your stakes back including a profit, Row of numbers does not repay your losses that quick, but it does not lead to big stakes either (which Martingale does).
Row of numbers gives you more flexibility compared to Martingale because you can adjust your stakes in a more suitable way. The disadvantage is that this system requires more effort from you, as you have to make a row of numbers on a piece of paper and add numbers when you lose, and remove numbers when you win. You need to have better control with your betting, so to say.
Let's have a look at the system:
First decide how much you want to win. E.g 1000 $. Then you have to figure out how long it's going to take to reach your goal. This is the tricky part, because when you win you must remove the first and last number in the row, but when you lose you must add a number to the row.
As a result of this, you must try to decide an average probability for a win, given a fixed odds. If you want to play on games with an average odds of 2.0, set your probability to 40% (or thereabouts). It's better to underestimate rather than overestimate your abilities. If you overestimate your ability, you will have to make up for it by increasing your stakes, and increasing the stakes can easily become rather unpleasant if you hit a losing streak.
If we imagine the 1000$ split into 20 50$ wins, we can calculate how long you will have to bet in order to get a 1000$ total win, given the 40% chance of winning with odds=2.0 (a 50% chance means you're betting even with the bookmaker).
With a 40% chance of predicting the 2.0 object correctly, you will lose 60% of the picks. Thus you lose 50% more often than you win (60/40). In the case of winning, you get to remove 2 numbers on the list (the first and last number).
3.Kelly criteria
Systems like Martingale and Row of numbers use high level of progresion to make up for the punters lack of margins. In these systems, stakes are successivly increased when losing, thus the punter are running a high risk of bankruptcy.
In the Kelly Criteria, progresion increases when you are winning, and decreases when you are losing. The stakes are decided by a percentage of the size of your funds. In the Kelly Criteria, the risk of bankruptcy is virtually eliminated.
The Kelly Criteria requires that the punter have the probabilities on his side. When using Kelly, it's expected that the punter can bet even with, or better than the bookmaker. If a home team has got odds = 2.0, you will only bet on the home team if you think it has a 50% chance or more.
The Kelly Criteria has got it's name from John L. Kelly, the American who invented this theory and formula.
In short, Kelly's theory says that if you can determine a somewhat correct probability for an events outcome, then the formula will determine the exact amount of your funds which you should bet on that event.
If you overestimate your ability to predict an outcome (i.e you predict a 60% chance, when the correct prediction should be 52%), you will pay for it by losing money. If you underestimate your ability to predict the outcome (i.e you predict a 55% chance, when the chance is 60%), you will win money, but not as much as if you were betting with flat stakes. This is due to the fact that Kelly's formula optimizes your stakes if you are able to predict with a high degree of accurracy.
With Kelly you make money by having only a small advantage on every game you pick. If you instead have a small disadvantage for evey game you pick (i.e you overestimate your predictions), you will lose money compared to flat stake betting
Before starting with Kelly, decide upon the following:
Size of your fund
A fund sized 10-15 times the size of your normal singlebet is enough. Ofcourse these funds must be funds you can afford to lose. Remember that with the Kelly Criteria, you will not lose all your money straight away, because the stakes are decided as a percentage of the actual size of your fund.
This is fine by the bookie, because he knows that the customer most likely will have an empty account in a few weeks time due to his poor money management anyway. The bookmaker will see this loss as a short term investment, because the average punter will feel aroused by his winnings, he's getting eager, and start to bet more often and often with higher stakes. Unevitably, the bookie's getting his money back, with a solid interest on top.....
Profesional punters know that bookmakers operate this way, (presenting good prices every now and then, get money circulation, let the customer feel he's winning, thus generating more cash flow, and eventually more money in the bookmaker coffers), and therefore they wait patiently for the next round with extra good prices offered.
The profesional punter do not get carried away after a few wins. He knows what to expect, and acts thereafter. The profesional punter is not necessarily better to predict an events outcome than other punters , but he's definitivly much better with money management
1.Martingale
Martingale is probably the best known system for money management. Originally designed for use in casinos, this system has nothing to do with picking objects. Martingale is a system which helps you control your stakes. With Martingale, you can be a lousy bettor, but still win money. Please not that Martingale is a system with very high risk of going broke.
The principle of the Martingale system is as follows:
If you lose, you double your stakes, and if you win, you start all over on your starting stake. This means that you eventually will be ensured a profit. Follow this example: You've found a game with odds 2.0 for home victory. You bet 100$, but you lose, as the game ends in a draw. Next time you bet 200$ on a game with odds 2.0. If you lose again, you must bet 400$ on a game with odds=2.0. If you win this time, you've placed a total stake of 100+200+400 =700$, and you've won 100$ for your efforts. The 100$ payoff is equal to what you would've won on your first bet.
Fantastic system, or what ?
Certainly, if you had unlimited funds available. Or if the bookie would drop his maximum bet limit. Or if you have the sufficient cool when you hit a long losing run. Remember, with odds=2.0, you will have to wager 32 times your original stake if you lose 5 times in a row. And losing 5 times in a row is not too difficult with odds 2.0..... And even if you have lost 5 times in a row, you have no greater chance of winning the sixth time. Too many people think they'll have to win soon when they've lost many in a row. The fact is that the chances for a win is just as big (or small if you like) as when you started the betting sequence. Martingale is in other words a very dangerous system, and should be used by punters with large funds and no nerves. In my opinion, Martingale is not a suitable money management system for the average punter due to it's heavy level of progression
2.Row of numbers
The German word for this system is "Die Abstreichmetode". This is also a system well known from casinos, and has a lot in common with Martingale (recovering from losses by increasing stakes). But Row of numbers is not as tough as Martingale though. While Martingale can quickly give you your stakes back including a profit, Row of numbers does not repay your losses that quick, but it does not lead to big stakes either (which Martingale does).
Row of numbers gives you more flexibility compared to Martingale because you can adjust your stakes in a more suitable way. The disadvantage is that this system requires more effort from you, as you have to make a row of numbers on a piece of paper and add numbers when you lose, and remove numbers when you win. You need to have better control with your betting, so to say.
Let's have a look at the system:
First decide how much you want to win. E.g 1000 $. Then you have to figure out how long it's going to take to reach your goal. This is the tricky part, because when you win you must remove the first and last number in the row, but when you lose you must add a number to the row.
As a result of this, you must try to decide an average probability for a win, given a fixed odds. If you want to play on games with an average odds of 2.0, set your probability to 40% (or thereabouts). It's better to underestimate rather than overestimate your abilities. If you overestimate your ability, you will have to make up for it by increasing your stakes, and increasing the stakes can easily become rather unpleasant if you hit a losing streak.
If we imagine the 1000$ split into 20 50$ wins, we can calculate how long you will have to bet in order to get a 1000$ total win, given the 40% chance of winning with odds=2.0 (a 50% chance means you're betting even with the bookmaker).
With a 40% chance of predicting the 2.0 object correctly, you will lose 60% of the picks. Thus you lose 50% more often than you win (60/40). In the case of winning, you get to remove 2 numbers on the list (the first and last number).
3.Kelly criteria
Systems like Martingale and Row of numbers use high level of progresion to make up for the punters lack of margins. In these systems, stakes are successivly increased when losing, thus the punter are running a high risk of bankruptcy.
In the Kelly Criteria, progresion increases when you are winning, and decreases when you are losing. The stakes are decided by a percentage of the size of your funds. In the Kelly Criteria, the risk of bankruptcy is virtually eliminated.
The Kelly Criteria requires that the punter have the probabilities on his side. When using Kelly, it's expected that the punter can bet even with, or better than the bookmaker. If a home team has got odds = 2.0, you will only bet on the home team if you think it has a 50% chance or more.
The Kelly Criteria has got it's name from John L. Kelly, the American who invented this theory and formula.
In short, Kelly's theory says that if you can determine a somewhat correct probability for an events outcome, then the formula will determine the exact amount of your funds which you should bet on that event.
If you overestimate your ability to predict an outcome (i.e you predict a 60% chance, when the correct prediction should be 52%), you will pay for it by losing money. If you underestimate your ability to predict the outcome (i.e you predict a 55% chance, when the chance is 60%), you will win money, but not as much as if you were betting with flat stakes. This is due to the fact that Kelly's formula optimizes your stakes if you are able to predict with a high degree of accurracy.
With Kelly you make money by having only a small advantage on every game you pick. If you instead have a small disadvantage for evey game you pick (i.e you overestimate your predictions), you will lose money compared to flat stake betting
Before starting with Kelly, decide upon the following:
Size of your fund
A fund sized 10-15 times the size of your normal singlebet is enough. Ofcourse these funds must be funds you can afford to lose. Remember that with the Kelly Criteria, you will not lose all your money straight away, because the stakes are decided as a percentage of the actual size of your fund.