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Having a regular value edge over the odds is futile unless you make it count. This is where staking and money management come to the fore. Staking is a fine balancing act between not over exposing yourself and risking going broke, and placing enough money on your selections to ensure that your bank growth is not stunted. A wise man once said ‘never strike a bet where the stake will affect how you punt tomorrow’. Never a truer word spoken. To be profitable in the long term, there can be little emotion when striking your bets. The key phrase in the last sentence is ‘long term’. Each bet is part of the bigger picture and the stake for an individual bet should not have an impact on your psyche, or bankroll.
A staking plan is, essentially, a method to determine how much money should go on each bet. There are hundreds of different staking strategies and approaches, but ultimately the aim is to find a staking strategy that:
Fixed return staking involves calculating stakes based on achieving a set return. Therefore, the odds will dictate as to how large the stake size is. For instance, if a punter is using a fixed return of £100, and the odds of a horse were 4/1 5.00 +400 4.00 4.00 -0.25 , his stake would be £20 (20 x 4/1 5.00 +400 4.00 4.00 -0.25 = £100). Likewise, if the horse were 1/1 2.00 +100 1.00 1.00 -1.00 then the stake would be £50. The advantage of this plan is that it takes into account the relative probabilities of success and increases/reduces the stakes accordingly and should produce consistent returns, as opposed to big swings in the betting banks. The disadvantage is that when backing big priced winners, the returns are exactly the same as when picking an odds on favourite – this can be a difficult pill for some bettors to swallow. The return that the punter is aiming for will usually be a fixed percentage of a betting bank i.e. 1-2%.
This method of betting involves placing the same stake on each bet. For instance, a punter with a £1000 betting bank may place 1% (£10) on each selection. Over the course of a year, the individual may make 150 points – giving a £1500 profit and an end betting bank of £2500. Level stakes are often the way that novice and beginners operate as they are easy to calculate.
Depending on risk tolerance and average odds of selections, punters generally use between 0.5-2% of their betting bank for level stakes – keeping the same bet size regardless of whether the bank is increasing or decreasing. The drawback of this method is that it doesn’t support maximal growth. If a punter has a consistent edge over the bookmakers, then they are not compounding that advantage by maintaining the same stake.
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Ratchet staking requires punters to calculate their bet size based upon the balance of their betting bank. The figure is typically used as a percentage of the bank and will increase as it grows and reduce as it gets smaller. The advantage of this method is that is can help accentuate growth during a profitable period, and it protects the bank during a baron run. For an individual who has several bets a day, calculating the stake for each bet requires the bettor to be keeping up with the action and results which isn’t always feasible.
Both level stakes and ratchet betting have their advantages, and combining the two approaches can be an excellent way of taking advantage of a consistent edge to multiply your betting bank balance. The stake that is placed on each horse is a set percentage of the betting bank and is reviewed after a set period of time. For example, someone with £1000 betting bank may use a 1.5% staking plan, so each bet is a level £15 stake, with the bank and stake reviewed at the end of each month.
Assume for arguments sake that a bettor has recorded a 5% ROI (which is fairly manageable for a seasoned punter). He adopts the 1.5% fixed stake and tends to strike an average of 6 bets a day.
With a daily turnover of £90 (6 bets x £15 stake), a 5% ROI would indicate a daily profit of £4.50. With the betting bank reviewed at the end of each month, and a new stake derived from the balance, we can see how quickly the bank can grow:
Starting in January and reassessing the stakes after each month, within a year, the bankroll grows four times over. This shows that with a consistent edge and a safe staking plan, a healthy profit can soon be achieved.
Adjusting the ROI to 10% and using the same number of bets on a daily basis, we can see that the bankroll grows exponentially:
With profit compounded on a monthly basis, the bank grows a staggering 14 times in the first year, with profit levels approaching £4000 a month, from a starting fund of £1000. Of course not every month will work out to with the same profit levels, and some months may even be losing ones, however, the table gives an indication of how a betting bank can mature with a long term edge.
In terms of ROI, everyone has a different modus operandi. Certain individuals will have a high number of bets and will be satisfied with a lower yield, whilst contrastingly some take a more selective approach, and achieve a higher yield as a consequence. The number of bets and the odds of the selections should be factored in to any staking plan.
The Kelly Criterion betting strategy that is becoming increasingly used by experienced and professional punters and its aim is to maximise profitability by determining stake sized based upon the perceived value edge over the odds on offer. The Kelly Criterion computes the optimal amount to be placed upon a bet, with the larger the edge, the bigger the stake. This strategy is discussed in length in The Kelly Criterion article .
With the Kelly Criterion plan, the stakes are determined by a formula which gives the percentage of betting bank that should be outlaid. At the end of the month/year bettors can review their bankroll and as such the relative stake sizes will change. This staking method can be quite aggressive and as such is probably best to individuals with an intricate knowledge of value.
Ultimately, there is no absolute standout staking method that can be prescribed to punters. Staking plans are dependent upon individual risk tolerance, betting preferences, and knowledge of the game. Advanced punters often prefer the Kelly Criterion, while newcomers find level staking the easiest method to begin with. A combination of fixed/ratchet staking can be beneficial for many punters who want to combine a straightforward plan with one that maximises their growth.
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