The secret to sports betting – part 4

It is time for the last part of the secret to sports betting. In part one, we talked about the importance of having a separate gambling budget so that the betting does not go beyond the household money. In addition, we began to accept that all matches can end with home win, draw or away win and that you must never bet with your heart. Finally, I warned against combining many objects on one coupon and made a strong recommendation to always bet where you get the best odds.

In part two, I discussed having knowledge of what you are betting on as well as specializing in something, not listening to “experts” who cannot show results, taking breaks in betting when necessary and the importance of keeping accounts.

In part three we looked at how to find the matches you want to bet on before this week we put these games into a system.

The 10 basic rules

1) Only bet for money you can afford to lose

2) Realize that all matches can end with home, draw or away win

3) Place your bets where you get the best offers

4) Don’t make judgement based on your team preferences

5) The fewer games on each coupon, the better

6) Have knowledge about what you are betting on

7) Only listen to experts who can prove they are worth listening to

8) It is allowed to take a break

9) Specialize in something not everyone knows everything about

10) Do the accounting on all bets placed

Martingale

It is easiest to start with the system that no one ever should use! Every now and then a “new system” comes up that someone has found. Mostly, it always involves a variation of the Martingale that has been known for over 100 years. The strategy is simple: You find something that gives 2.00 in odds and place your bet. If you lose, you double your bet until you win. Then you go back to the starting bet. Thus, you will win back everything you have lost + the starting profit, when you finally hit. The problem naturally comes when the losing streak becomes too long. In the book “Fixed Odds Sports Betting: Statistical Forecasting and Risk Management” by Joseph Buchdahl from 2003, advanced Martingale calculations are made which show that during 1000 bets at odds of 2.00 you will have a losing streak of ten at least once . And with a value of at least five percent on all games, the risk of bankruptcy is 38 percent! With an initial investment of 500 euro, the account looks like this:

Game 1: 500 at 2.00 in odds = loss

Game 2: 1,000 at 2.00 in odds = loss

Game 3: 2,000 at 2.00 in odds = loss

Game 4: 4,000 at 2.00 in odds = loss

Game 5: 8,000 at 2.00 in odds = loss

Game 6: 16,000 at 2.00 in odds = loss

Game 7: 32,000 at 2.00 in odds = loss

Game 8: 64,000 at 2.00 in odds = loss

Game 9: 128,000 at 2.00 in odds = loss

Game 10: 256,000 at 2.00 in odds = loss

You have now bet a total of 511,500 and have received zero. The system says that on game 11 you should bet 512,000 to get back all the losses plus the five hundred you wanted to win in the first place. Tempting?

Martingale is also called the “Monte Carlo system”. It comes from the fact that at a Casino in 1913, 26 times in a row the roulette showed black. The players started betting massively on red along the way because “it must be red soon”. Of course, it didn’t have to. The chance that there will be a head on the next coin toss is 50 percent, regardless of how many times there have been tail in a row.

Another example of this flawed psychology of many players is the “Monty Hall problem”. There are three doors. One has a new car behind him, the other two have an orange. You choose door A. The host opens door C and shows an orange. You will then be asked if you want to switch to door B or stand on door A. Then you must always switch to door B! The math is simple:

Before starting:

Door A: 33.33 percent chance of car

Door B: 33.33 percent chance of a car

Door C: 33.33 percent chance of car

You choose door A. There is then a 33.33 percent chance of a car and a 66.66 percent chance of an orange

The hosts, knowing where the car is, open a door with an orange. It doesn’t change your chance that you hit from the start. There is still a 66.66 percent chance that you missed the initial selection!

The Kelly Criterion

Now that the Martingale is hopefully buried once and for all, we can look at the Kelly Criterion. Here, you are expected to play with value in your bets, as we talked about in Part 3. The Kelly Criterion uses the expected value to tell you how much to bet.

The formula for finding the stake is:

(BP – Q) / B

B = the odds minus 1.00

P = chance of hit

Q = chance of miss

Say we give Tottenham a 55 percent chance of winning at home against Arsenal and the odds are 2.00. Then the formula becomes:

B = 1.00

P = 0.55

Q = 0.45

(1.00*0.55-0.45)/1.00 = 0.10

You must therefore bet ten percent of your fund value on this game. In our eyes, this is far too aggressive. There are therefore some calculators that recommend setting 50 percent or 25 percent of what the Kelly criterion recommends. Then you are on a somewhat healthier management of your gambling money, but using the Kelly criterion requires that your percentage setting matches 100 percent. We think it is demanding enough to find value in odds as told in part three. Using it also for determining how big the bet should be is maybe a bit too much.

Our model

Our model is thus the one we recommend. Here we settle the accounts once a week and always put two percent of the fund value on our games. Of course, we could have the potential to earn a lot more with more aggressive percentage bets, but our whole goal is to have a healthy relationship with betting. We set aside the maximum amount we want to lose during an entire calendar year and manage our stakes accordingly. If we made a profit last week, the bet goes up, if we made a loss, the bet goes down. We don’t seek to win back losses quickly – we have an overall strategy where we know that as long as we percentage matches well, we will always end up in profit!