Variance is a key element in profitable sports trading. Learn how it works and improve your sports betting strategies today!Read More
SPORTS BETTING 101
This video explains variance in sports betting and trading. Understanding variance is key for any bettor with a goal of becoming a professional sports bettor and do sports betting for a living. It is hosted by Marius from Trademate Sports.
In this article, I'll briefly go into the different parameters that ultimately decides your variance. If you are unfamiliar with what variance is and why it is important, start reading this section from the beginning. For the bettors out there that do not enjoy larger swings in your bankroll and deviance from your expected value, I'll also discuss what actions you can take in order to minimise those swings.
When placing trades - there are 4 main parameters that impacts your variance;
- Time until the game starts
- The edge %
- Whether you place bets that are dependant of each other
- Use a lower Kelly Percentage
- Set a maximum bet
This is the most obvious one. The higher the odds you place on, the more swings you will see in your bankroll. The reason is quite simple; if you bet only on odds of 11 with an edge of 10%, you can expect the bet to be a winner one out of every 10 games, and you'll get paid back 11 times your wager. In theory, you'd then lose 9 bets in a row then win one and win back more than you lost in the previous 9 bets.
Time until the game starts
The time until the game starts is quite important. The reason is, if you place a bet a full day before game start with an edge of 3% - new information may occur that could swing the bet out of your favour. To be extreme, there is a chance that all the key players of your team might miss their flight, making your team lose the game. There is also a chance that the bet gets stronger, as the same thing could happen to the opposing team. The only thing we can say for sure is that this will increase your variance, as the lines and the information are not settled yet.
If you are unfamiliar with what an edge / value bet is, check out these articles. If you place on marginal edges (1-2%), chances are they can swing back if you place it a far from game time. The reason is that even the smallest piece of information may shift the market out of your favour. When you find higher edges, there is always a reason the market shifts so drastically - and the probability that it would shift back is higher. Most of the players in our community apply a rule of thumb that the longer it is until game time, the higher the edge threshold is. For instance, if it's less than 2 hours until game time, I'll place on my full range. If it's 2-6 hours, I'll only place on 5%+ edges. If it's more than 6 hours, I might place on 8%+ edges.
Multiple lines on same game
If you place multiple bets on the same game with dependant lines, you'll see huge swings. If you place bets on +0.25 Home, +0.5 Home, +0.75 Home, +1 Home as well as Home to win and you follow our bet sizing - you'll have a lot of money that the home team is going to win. Keep in mind that if you place on many lines on the same game you need to scale down the bet size. One could argue that decreasing the bet size and placing on multiple lines could decrease variance, for instance if there's an edge on Over 1.5 and Over 2.5 goals, you place half the bet size on both of them.
Use a Lower Kelly Criterion Percentage for your Stake Sizing
Set A Max Bet
Also, one should apply a max stake size. I operate with 1% of my overall bankroll. It is possible to set it higher and also to use a higher Kelly % if one wants to take more risk and increase the turnover. This could speed up the bankroll growth, but as Warren Buffet said it with regards to investing, "Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1.". To take an extreme example, if one loses 50% of the bankroll, one will need to increase it by 100% to get back to the starting point. So the important aspect is to manage the risk so that one does not put oneself in a position where the bankroll has decreased to a point, which makes it difficult to recover, nevermind to make a solid profit.