Staking: One method to improve your betting

This article addresses the importance of different staking methods in sports betting, particularly in the context of repeated bets where the risks of losses and chances of gains fluctuate. We will explore why choosing the right staking method is crucial by examining popular examples and discussing the advantages and disadvantages of each. Additionally, we will look at how the so-called “Kelly Criterion” can contribute to optimized betting management.

Why is your staking method important ?

Professional blackjack player and author Ed Thorp, known for his skills as a card counter, succeeded beyond expectations in some of Las Vegas' biggest casinos. His success led casinos to use multiple decks to counter this technique and to intensify their fight against card counting.

Staking Method

A staking method is a technique for calculating the amount of money to place on a bet with the goal of making consistent profits as part of a betting strategy.

Despite his expertise as a professional gambler—he published two books on the subject—Thorp attributed the majority of his success to a staking formula developed by mathematician John Kelly Jr. He said, "Playing strategy is maybe a third to a quarter of what you're going to get out of it. Betting strategy might be two-thirds or three-quarters."

It's easy to say that a betting strategy is important, but what makes a useful strategy in sports betting? Inspired by Alex Bellos's Alex's Adventures in Numberland, we mapped the success of five betting strategies over a series of 500 bets:

Strategy A: Bet everything, every time

Bet your entire bankroll on each bet. The advantage is that you get big returns quickly. The downside? As soon as you lose, you're out of money and out of the game.

Strategy B: Fixed wager

Bet a fixed amount for each bet, without varying, no matter how much you win. In this example, it was €100. If your chance of winning is 55% on a 2.00 bet, this method dramatically reduces the risk of losing your entire stake, but your winnings increase in a "slow and steady" fashion.

Strategy C: Martingale

Double your stake after each failed bet to cover your losses with the next bet’s winnings. This method provides a quicker increase than fixed wagers, but if you experience a losing streak, the required stakes increase exponentially, and soon you'll be betting large amounts to cover your losses.

Strategy D: Fibonacci

Increase your stake according to the Fibonacci sequence to cover losses. This method has similar drawbacks to the Martingale method in sports betting, but it slows down how quickly stakes increase during a losing streak (and therefore also reduces the rate at which you win).

Strategy E: Proportional Betting

Bet a fraction of your bankroll in proportion to your edge. In this simulation, we used the Kelly Criterion formula for proportional sports betting. According to this method, your stake should be calculated by dividing your edge by the odds.

Which strategy is best ?

The correct answer is:

1 Bet everything ?

2 Martingale ?

3 Fixed wager ?

4 Proportional Betting ?

5 Fibonacci ?

As you can see from the descriptions above, proportional betting seems to have a natural advantage over the other systems. Imagine you're down to your last €100 – you’d bet €10, keeping you in the game for much longer than a fixed-bet system, where your last €100 would be your final stake.

Proportional betting is the only method, apart from fixed betting, to avoid losses in the simulation, while fixed betting offered slow but steady gains. At the end of the 500 bets, proportional betting had brought in €18,275, while fixed betting had only earned €6,400.

Bettors should note that this relies on a major assumption: that the edge is in your favor; without it, the results of all staking strategies would change drastically.

Choosing Your Staking Technique

The simulation shows that different staking techniques yield vastly different outcomes, even if the other variables remain the same. The difference between being wiped out and finishing with €18,275 after 500 bets was simply choosing the right staking system.

It's important to remember that there is no "ideal" system. Although the Kelly Criterion worked in the example above, there may be more suitable systems for different types of bets. It’s essential to find the staking style that suits your sports betting, usually through research and simulation.

Finally, it’s crucial to remember that the Kelly Criterion only works if you know your edge, which you use to calculate your stake. If your calculation of your edge is incorrect, you’re still going to face difficulties, regardless of the strategy you use.