How much should I bet?

The answer to the above question depends on four things, but the question you must ask yourself first is: do I have value?

The answer to the above question depends on four things, but the question you must ask yourself first is: do I have value?

You can find a discussion of value elsewhere, but we will assume that you have identified value.

The four things that determine your stake size are:

1) How much money you have available to bet, i.e. your betting bank.

2) The actual odds being offered by the bookmaker or exchange

3) Your personal preference/tolerance for safety/risk

4) The amount of value or 'edge' you have, i.e. how wrong do you think the bookies odds are

Lets take them in turn:

1. Your betting bank

1a) You should only bet with money that you can afford to lose. Seems obvious, but surprisingly easy to fall foul of. Beware of betting this month's mortgage money on a 'sure thing' etc!

1b) The next part is also fairly obvious, the more money you have available in your bank the larger your stake (bet) size can be. Because this is a personal issue (e.g. £1000 might be a huge some to one person and a minor sum to another), it is often easier to describe the bank as 100 'points' where a point can be 1p,£1, £100 etc.

1c) You need to decide whether you are going to vary your definition of a 'point' every time the bank changes (i.e. every time you make a bet), periodically (e.g. once every month or year), or systematically (e.g. every time it increases or d ecreases by £10, 20% etc).

2. The odds on offer

Many people prefer something called 'level staking' where the same amount of points are placed on every bet, regardless of the odds offered. Thus, whether I was betting on something at 1/10 or 100/1 I would use the same stake size. The big advantage is simplicity.

However we should bear in mind that on average longshots (as defined by the odds) will tend to tend to win less often, so I am likely to lose more money betting on longshots than on short-priced favourites.

To counteract this phenomonen, many punters like to use something called 'fixed profits' staking where you stake to win a constant amount, e.g. 5 points per bet. In this scenario you would be 50 points on a 1/10 shot and 0.05 points on a 100/1 shot. If they win the returns are (One tenth of 50 points=5points, and 100 times 0.05 points=5points respectively). Fixed profits staking is generally preferable to level staking. It is slightly more tedious to calculate the stake size, but you will have less fluctations in your bank.

3. The level of risk you are comfortable with

Some people are cautious by nature, some people are risk takers by nature. Your staking should reflect what you are comfortable with. You should consider the average odds at which you bet, the number of bets you tend to have 'riding' at any given time etc when you are deciding how much to bet. Imagine you have 3 really bad days (i.e. virtual or absolute wipeouts!) in a row - which can very easily happen!

until you are an experienced bettor it is probably better to be conservative initially

Calculate how much of your bank you would have left after this at various stake sizes and choose according to what level of risk you are comfortable with. The trade-off of course is that lowering the risk for the bad times, also lowers the size of the pay-off in the good times, but thats life! Its a very personal thing that only you can decide. However, until you are an experienced bettor it is probably better to be conservative initially.

4. The amount of value or 'edge' you have

Lets say I have 2 bets (A & B), both being offered at a price of 10.0. By my calcuations the 'fair odds' for A are 5.0 while those for B are 2.0. An extreme example it should be noted - if you get this kind of discrepancy your estimations are almost certainly wrong - the bookmakers are not THAT bad at their job! By your reckonings A has a 20% chance of winning and B has a 50% chance of winning, even though they are both offered at the same odds - 10.0.

It stands to reason that I should bet more on B than I should on A. In the case of A I have an 'edge' (offered odds/fair odds-1) of 10/5-1=2-1=1=100%, while in the case of B I have an 'edge' (offered odds/fair odds-1) of 10/2-1=5-1=4=400%.

A mathematician named Kelly worked out that the optimal stake (i.e. that which made your bank grow fastest) was sized as:

Edge/(Odds-1)

In the above example we would take 11.1% of our bank on A and 44.4% on B

Links Relevant to this Topic
Staking Plans
Money Management