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Gibbons' Sports Money Management Sports Betting As An Investment
I recommend
the
following
one-half
Kelly
Money
Management
Strategy
be
used
by all
subscribers.
It is
betting
one-half
of the
bet
size
that a
full
Kelly
would
indicate. I
have
increased
our
overall
winning
percentage
to
over
55%
(actually
55.3%
as of
7/25/2010) because
of
recent
changes
I have
made
to
play
selection.
This
modified
Kelly
as
depicted
in the
book
Fortune's
Formula
by
William
Poundstone,
will
allow
us to
have
only a
11.1%
chance
of
losing
our
bankroll
before
we
double
it.
Using
Kelly
at
half
strength
only
reduces
our
profitability
by
25%,
but
greatly
enhances
the
chance
that
our
bankrolls
will
remain
safe.
The table below shows the number of Units on the left and the Bet This is the percentage you bet per unit times the number of Units. The table assumes a winning percentage of 55% on all plays in aggregate. Your unit size is the variable, but everyone will be betting the identical percentage of their individual bankrolls based on the number of plays times the units per play. If you have $10,000 bankroll and we have a one (1) unit play for that day, you would invest $275.00 (10,000 X .0275). If you have a $100,000 bankroll (or much more) as most of our clients do, you would invest $2750.00. If we have 9 units in total, you will bet 15.7% of your bankroll (9 X 1.75). If we have a large number of bets/units that exceed 14, you simply multiply the proper number of units X 1.25% to get the percentage of your bankroll to invest- it's that simple. In money line sports such as hockey and baseball, we use flat betting on money lines, so if we are playing on a -160 favorite, we are laying $100.00 to win $62.50, etc. For point spread bets, were are risking 11 to win 10. The one-Half Kelly Money management strategy will allow us to compound our bankrolls geometrically with risk sharply reduced. Investing a smaller percentage does not allow us to maximize our returns while taking a reasonable risk. No other alternative money management strategy will produce a greater rate of return. That is why I use it and nothing else. Those that are critical of a modified Kelly simply do not know what they are talking about.
On average, I will have about 1900 plays in all of the sports I analyze per year. I recent refined my screening methods for play selection, and as a result, we are winning a much higher percentage of the time. Long term sports investors can make considerable money with my plays by being both patient and highly disciplined. 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:
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