This small article on Bankroll Management brings together different facets of some different techniques we have discussed in other articles to make a case for a new format of bankroll management.
As we discussed in Value Betting, the primary failure with this approach is ascertaining the true odds of an event happening.
It's subjective and if you take into account the many factors possible in a horse race for example - jockey skill, ability on the going, wind, which horses its running with, the distance of the race, the previous race results, the time of day etc then it's almost impossible to ascertain an accurate prediction.
What we have found to be the most usable technique for ascertaining horse's chances of winning is actually to compile your chances of guessing the winner instead.
If you look at the 20 odd horse races running today and without looking at the available odds choose your horse in each race predict your winner.
How many would you get right? 10%? 30%? If you're consistent in your selection methods and you keep records for a long enough period then you should be able to get a usable strike rate percentage.
This figure basically states that you ordinarily get 32% (for example) of your race predictions correct.
We could therefore say that immaterial of the ability of the horse or all of the other factors you've selected the horse you've chosen has a 32% chance of winning.
We like to call this the "MyValue" percentage.
So what does this rather twisted statistical logic mean? Well it means that we can use this new found percentage as the basis for the Kelly Criterion which we mentioned in our previous article.
As discussed in that article, we don't think that the straight Kelly formula works for a couple of reasons but with the addition of the "MyValue" percentage and using a 3rd Kelly formula you have an extremely usable format for bankroll management.
Let's say that you are getting odds of 5-1 for a horse and your MyValue percentage is 24%.
You simply follow this process: A.
The odds offered multiplied by your MyValue percentage, in this case 6 multiplied by 24% equals 1.
44.
B.
Secondly subtract your MyValue percentage from one, in this case that's 1-.
24 giving 0.
76.
C.
Thirdly subtract the second figure, 0.
76 from your first figure, 1.
44 giving 0.
68 D.
Next you need to divide this new number by the odds being offered, in this case 0.
68 divided by 6 equals 0.
11.
E.
Lastly divide this final figure by 3 and then multiply by 100.
Our example shows 0.
11 divided by three is 0.
036 and then multiplied by 100 gives 3.
66 Therefore, we would stake 3.
66% of our bankroll on this event.
As we discussed in Value Betting, the primary failure with this approach is ascertaining the true odds of an event happening.
It's subjective and if you take into account the many factors possible in a horse race for example - jockey skill, ability on the going, wind, which horses its running with, the distance of the race, the previous race results, the time of day etc then it's almost impossible to ascertain an accurate prediction.
What we have found to be the most usable technique for ascertaining horse's chances of winning is actually to compile your chances of guessing the winner instead.
If you look at the 20 odd horse races running today and without looking at the available odds choose your horse in each race predict your winner.
How many would you get right? 10%? 30%? If you're consistent in your selection methods and you keep records for a long enough period then you should be able to get a usable strike rate percentage.
This figure basically states that you ordinarily get 32% (for example) of your race predictions correct.
We could therefore say that immaterial of the ability of the horse or all of the other factors you've selected the horse you've chosen has a 32% chance of winning.
We like to call this the "MyValue" percentage.
So what does this rather twisted statistical logic mean? Well it means that we can use this new found percentage as the basis for the Kelly Criterion which we mentioned in our previous article.
As discussed in that article, we don't think that the straight Kelly formula works for a couple of reasons but with the addition of the "MyValue" percentage and using a 3rd Kelly formula you have an extremely usable format for bankroll management.
Let's say that you are getting odds of 5-1 for a horse and your MyValue percentage is 24%.
You simply follow this process: A.
The odds offered multiplied by your MyValue percentage, in this case 6 multiplied by 24% equals 1.
44.
B.
Secondly subtract your MyValue percentage from one, in this case that's 1-.
24 giving 0.
76.
C.
Thirdly subtract the second figure, 0.
76 from your first figure, 1.
44 giving 0.
68 D.
Next you need to divide this new number by the odds being offered, in this case 0.
68 divided by 6 equals 0.
11.
E.
Lastly divide this final figure by 3 and then multiply by 100.
Our example shows 0.
11 divided by three is 0.
036 and then multiplied by 100 gives 3.
66 Therefore, we would stake 3.
66% of our bankroll on this event.
Source...