There are really two parts to a successful betting strategy. The first is to find a successful method of predicting sporting events through the principles of value betting. Without an edge, no betting system will be successful. Where a punter has achieved one, however, his second task is to plan a staking strategy in order to maximise his profits. Merely increasing the stake size or the odds on a bet with a view to securing a greater return is not, however, the safest way to achieving this goal. The downside to such a basic approach is an increase in bankruptcy risk. Instead, the punter must learn to identify, assess and mitigate the perils associated with his betting strategy through effective risk management. What this actually means in practice is a study of staking strategy and money management.
Proper money management may mean different things to different people, but common elements include:
There exist myriad staking plans, some with very elaborate names, including Martingale, D'Alembert, Oscar's Grind, Steady Drip, Kelly, Rolling Bank and many more. All of them in some way attempt to increase the profits a punter can win above those achievable from simple level staking. In the main they are successful, but for many, with an unacceptable increase in risk.
Broadly speaking, a staking strategy is likely to fall into one of 4 different categories:
For fixed, or level, staking, every bet placed is assigned the same stake size, regardless of the betting odds. Level staking forms the benchmark staking strategy against which all others should be compared for profitability and risk evaluation. Many punters see weaknesses with level staking and prefer to vary the size of their bets according to various criteria, including their strength and their odds. A bettor, for example, may choose to standardise the amount he wins for every successful bet. Where all the odds are the same, this will amount to level staking. Where the odds differ, the stake sizes will vary. This strategy might suitably be called the fixed profits staking plan.
Percentage (bank) staking, like level staking, standardises the size of the stake, but as a percentage of the size of the current betting bank at the time the bet is placed, rather than as a fixed number of points proportional to the initial bankroll. Kelly staking, which goes further than simple percentage bank staking by seeking to optimise the stake size according the odds and the edge the punter has estimated he has over the bookmaker, is a hybrid of percentage and fixed profits staking.
Finally, progressive staking involves increasing or decreasing the stake size after each bet, according to whether it won or lost, with a view to recovering earlier losses or enhancing gains whilst on a winning run. The Martingale and Pyramid staking plans are two examples of loss chasers. There are other, more complex staking progressions, but basically they all share a common goal.
A common misconception amongst less-experienced punters is that some staking strategies, in particular the progressive staking plans, can turn loss-making systems into profitable ones. This is impossible and represents a misunderstanding of the mathematical principles that underlie such strategies.
The problem, from a statistical perspective, is that to test any staking strategy one needs to have a reasonable number of results with which to work. To examine its exposure to risk, it is not simply good enough to analyse your own betting record, since this just represents one permutation of all possible betting histories due to the inherent randomness or noisiness in the way sporting results sequence themselves. A profitable record cannot, on its own, define the chance its underlying strategy has of failing. Similarly, an unprofitable record is not necessarily evidence of a flawed betting system, although the punter will be very tempted to give it up. To circumvent this difficulty, one must resort to a statistical analysis of the staking plan. The best way to achieve this is to simulate it using a computer model.
The most suitable staking strategy for a punter will depend extensively on his attitude to profit making and risk taking. A short-term gambler may prefer to stake large and risk more in an attempt to make a quick and sizeable profit. Conversely, a long-term fixed odds "investor" will prefer to employ more a more conservative staking strategy, where staying in the game is more important than making fast money. A punter who acknowledges and understands the uncertainties inherent in fixed odds sports betting, however, will be better able to choose a strategy best suited to his risk-reward preferences.