April 17, 2014

Gambling Bank Management Methods

The average gambler loses money to the gambling house largely as a result of poor bank management. Bookmakers can, from time to time, offer very good odds, especially after they have had a few good weeks (often weeks with surprising results, a lot of favorites who lose, etc.) and gamblers’ accounts will be emptied.

Bookmakers know that as soon as they offer some good odds (by that I mean really good odds), the average gambler will very likely deposit more money, and will almost certainly win right away, increasing the balance of his gambling account.

For the bookmaker, this is not a problem at all, because it knows that one way or another, it’s very likely that the customer will not have any money left in the account a few weeks later, due to his poor bank management. The house will see this loss as an investment in the short term, because the average gambler will feel excited about his winnings, and will get greedy, and start to bet more often and frequently, with ever greater amounts. Inevitably, the house makes back their money, plus solid interest.

Professional gamblers know that bookmakers work like this (offering good prices from time to time, getting money in circulation, letting the customer feel like he’s winning, and thus generating more cash flow and, eventually, more money in their coffers). Because of this, professionals wait patiently for the next round, with still better prices offered.

The professional gambler does not let himself get carried away by enthusiasm after a few victories. He knows what to wait for, and acts accordingly. The professional gambler is not necessarily better at predicting the outcome of an event than any other gambler, but he is much better at managing his bank.

There are 3 money management systems that are widely used by gamblers: Martingale, “Row of Numbers,” and the Kelly criteria. Although these systems are also known by other names, their function is the same, whatever name you use.

Martingale

Martingale is probably the best known system of bank management. Originally thought up for use in casinos, this system has nothing to do with picking outcomes. Martingale is a system that helps to control your stakes. With Martingale, you can be a terrible gambler, but still win money. However, note that Martingale is a system with a high risk of bankruptcy.

The principle of the Martingale system is as follows:
If you lose, you double your stake, and if you win, you bet a portion of the original stake again. This means that an eventually you will be guaranteed to win. Follow this example: You find a match with 2.0 odds for house to win. You bet €100, but you lose, because the game finishes in a tie. The next time you will bet €20 on a game with 2.0 odds; if you lose again, you must bet €400 on a game with 2.0 odds. If you win that time, you bet a total stake of €700 (100+200+400), and you won €100. The return of €100 will be equal to the amount he would have won if you had won your first bet.

Amazing system, or what?
Certainly, if you had unlimited funds available. Or if the bookmaker lowered its maximum limit on bets. Or if you were calm enough to know how to cope when you run into a long-term losing streak. Remember that with 2.0 odds, you will have to bet 32 times your initial stake if you lose 5 times in a row. And losing 5 times in a row is not too hard with 2.0 odds…. And even when you have lost 5 times in a row, you will have no greater chance of winning the sixth attempt.

A lot of people think they will have to win sooner or later when they lose many times in a row. But the fact is that the chances of winning are the same as when you started the series of bets. Martingale is, in other words, a very dangerous system, and it must be used by gamblers with major funds and no nerves. In my opinion, Martingale is not a money management system for the average gambler, due to its high level of progression.

Row of Numbers

The word to remember for this system is “Die Abstreichmetode.” This is also a well-known system from the casinos, and it has a lot in common with Martingale (recouping losses through increasing stakes). But the row of numbers, then, is not as harsh as Martingale. While Martindale can quickly recoup the amount of the return stakes, plus profit, a Row of Numbers does not recoup your losses so quickly, but it also does not lead to high stakes (like Martingale does).

Row of Numbers offers greater flexibility compared to Martingale, since you can adjust your bets in the most appropriate manner. The disadvantage is that this system requires greater effort, since you have to make a series of numbers on a piece of paper and add numbers when you lose and subtract numbers when you win. That is, you have to have better control over your bets.

We’re going to give you a sneak peek at the system:
First, decide how much you want to win. For example, €1000. Now you have to calculate how much time you are going to spend to reach your goal. This is the hard part, because when you win you will have to remove the first and last numbers from the row, but when you lose you will have to add a number to the line.

As a result of this, you have to try to estimate an average probability of winning, once the odds are set. If you want to bet on matches with average odds of 2.0, define your probability as 40% (or around that). It’s better to underestimate and not overestimate your abilities. If you overestimate your capacity, you will increase the stakes, and increasing the stakes can easily become rather unpleasant when you run into a losing streak.

If we imagine the €1000 divided into 20 €50 victories, we can calculate how much you will have to bet in order to obtain a total profit of €1000, following the 40% chance of victory with 2.0 odds (50% chance means that you are betting even with the house).

With a 40% chance of correctly predicting the results at 2.0 odds, you’re going to lose 60% of your predictions. Thus, it you lose 50% more often than you win (60/40). If you win, remove two numbers from the list (the first and the last). When you lose, you must add a number to the end of the list. If we write out this line of numbers, it will be something like this:

50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50

Determining your first stake:
As we said above, the first and last number will be removed if you win. 50 +50 = 100. In order to win €100, you will have to use a stake that will yield €100 in net profit. If the odds offered are 2.0, you have to bet €100. If the odds are 1.50, you have to bet €200. If the odds are 1.75, you have to bet €133.33. The method of determining the stake is:
Net profit
–––––
Odds – 1
The stakes for the next bets will be calculated in the same manner. If the first bet is €125, at 1.8 odds, and you lose this bet, you have to add 125 to the end of the list. The next bet will thus be the first and last number in the row, which are now 50+ 125, divided by (odds–1).
50 +125
————–
Odds – 1

Of course, you must replace “odds” with the actual odds offered in your results.
If you win, you must remove the first and last number from the row and, then, once again begin with 50+ 50 / (odds–1).

Although this system does not produce such a high level of progress as Martingale, it is still a relatively risky system. If you run into a losing streak, things can easily get out of control. Therefore, the calculation before the bets are of greater importance. Before starting with this type of system, perform a test with imaginary stakes for a period of a month or so. You will learn the system and you’ll understand the importance of being modest when determining your own capacity to predict results.

Kelly Criteria

Systems like Martingale and Row of Numbers use a high level of progression to compensate for the gambler’s lack of margins. In these systems, stakes are increased successively when you lose, and thus the gambler runs a huge risk of failure.

With the Kelly Criteria, the progression increases if you win, and decreases when you lose. The stakes are decided by a percentage of the size of the bank. With that Kelly Criteria, the risk of bankruptcy is practically eliminated. This requires that the gambler have the probabilities on his side. To use the Kelly Criteria, it is expected that the gambler can bet on par with, or even better then the house. If a house victory has 2.0 odds, you’re only going to bet in this case if you think that you have a probability equal to or greater than 50%.

The name of the Kelly Criteria comes from John L. Kelly, the American who invented this theory and its formula.

In a nutshell, the Kelly theory says that if you can manage to determine (to a certain extent) a correct probability for the result of an event, the formula will determine the exact amount of funds that must be bet for this event.

If you overestimate your capacity to predict an outcome (that is, to predict a 60% chance, when that correct predictions should be 52%), you’re going to pay for that by losing money. If you underestimate your capacity to predict the result (that is, you predict a 55% chance, when the chance is 60%), you going to win money but not as much as you could have with fixed stakes. This is due to the fact that the Kelly formula optimizes the stake if you are capable of predicting with a high degree of precision.
With Kelly you win money, having only a slight advantage over each match that you pick. If instead you have a slight disadvantage in all the matches that you pick (that is, if you underestimate the predictions), you going to lose money in comparison with fixed stakes.

Before starting with Kelly, decide the following:

Size of the bank.
A bank that is 10-15 times the size of your per-bet stakes is sufficient. Of course, these funds must be funds that you have the luxury of losing. Remember that with the Kelly Criteria you will not lose all the money right away, once the stake is decided as a percentage of the actual size of the bank.

How many times depends on how good is your ability to pick value bets.
Experience is very important in the art of sports betting.
Picking value bets correctly, and at the right frequency, is clearly the tricky part. You can only become a smart gambler through experience. Bookmakers do not offer many value bets, and therefore you must jump around from bookmaker to bookmaker and make bets with high differences. High differences means that the various bookmakers have different opinions about what are the right odds for the particular match. Use Internet Services to compare odds between various houses.
Bookmakers rarely offer a lot of value bets during the same week. Don’t wait to find value bets on more than 2.5 events during the week. When you find a result that you think has value, check this event carefully. If the odds given are 2.0, the team must have more than a 50% chance of victory, because the size of the stake is strictly related to the probability of winning (which is subjective in their opinion).

Duration of project

How long will you continue to use this system?

If you have defined a goal for your bets, the project finishes when the goal is reached, and then you start it all over again. This is how you start to understand how to win money, and thus you reinforce your character and discipline. If you don’t define a target, when you reach 100% return, reestablish the bank at its starting point. Remember that when money is in the bookmaker’s account, it’s the bookmaker that has the money, not you. And what is the point in winning money when you cannot use it as it was meant to be used? Therefore, re-establish your bank at its starting point (raise) when you reach an amount previously defined and start all over again. This makes your winnings visible.

Let’s analyze the system better:
The biggest advantage with the Kelly Criteria is that you going to lose less money when the bank is low. This is because of the fact that the next stake will always be a percentage of the current bank. When the size of the bank is small, the stake will also be small. If the average stake is 10% of the total bank, then it’s possible to lose 6 times in a row and still have about 48% of the bank left (stick in 0.9 and multiply it by itself 6 times).
We’re not going to bore you with advanced statistics, but if the probabilities are on our side (you bet with a 10% advantage over the house each time) the chance of losing 10 times in a row (with 2.0 audits) is 1/3000!!!
Kelly is not a system that provides rapid changes in your account. With Kelly, you will win money by having a small margin required, 5% extra over each match. If the margins are on our side, Kelly causes the stakes to increase. If you lose, they will decrease. As a result of this, you will not suffer major changes in your account. Kelly is a system for gamblers who do not bet just to win money, but also for their own satisfaction (when the prediction turns out to be good).

Conclusion

If you are a gambler with a high risk profile (you like to play) and you know that you rarely predict better than the bookmaker, then Martingale, or Row of Numbers, could be your bank management system. But be aware of the risks that these systems represent. The rate of progression can be devastating, and can destroy the project long before it starts.

If you have a low risk profile (you consider betting as an investment with a little more risk than the stock market) and you know that you are capable of predicting a little better than the bookmaker, then Kelly is your system. Kelly is the professional gambling system – a system for gamblers who seek perfection. A system that optimizes movement of funds, manage to predict better than the “enemy”, that is, the bookmaker, if only by a little.