NEVER go broke gambling | Ep 8

The Ristakers podcast is an attempt to document the lessons I've learned as a professional sports , better poker player , trader , overall risky person . My goal is to help listeners become smarter at gambling and smarter with risk in general , so you can apply these lessons , make a lot of money and then come back and teach me a thing or two .

I don't run ads , so I'd appreciate it if you like subscribe and share this with someone who might be interested . Last thing , I want you to please join the GoldenPants13 Discord server linked in the show notes . It's a free sports betting and DFS Discord server that blows any paid Discord server out of the water .

You can safely unsubscribe from all your paid servers . Join ours and have access to higher quality picks , a more engaged community and a ton of cool events . I hope to see you in there and let's get on with the show . Hey , it's GP13 here today we're going to talk about bet sizing and wait for it Most exciting topic in gambling bankroll management .

In jest , I say it as most exciting , but in earnest I mean that it is the most important topic in gambling .

And by that I mean every long-term successful gambler , whether their gambles are in the sports betting market , their hedge fund managers , their poker players , their blackjack players , whatever every single one of them has a strict bankroll management and bet sizing discipline built into their practice .

So the question for us is how do we determine our bet sizing , how do we determine our bankroll and how do we do it in a way that puts us at zero risk of going broke ? To do this , we have to first determine what our bankroll is .

So first , before going to bet sizing , we have to determine what our bankroll is , and in doing that we got to understand what a bankroll is . I think a bankroll is the amount of money that you're willing to lose gambling , the amount of money you have set aside for gambling . Again , it's a little nebulous , but stick with me .

Let's talk about what a bankroll isn't to hammer in and understand better what it is . A bankroll isn't the amount of money you have on your prize-picks balance . A bankroll isn't your loss limit for a week . Say , oh , I allow myself to lose $200 a week , not your bankroll . And a bankroll isn't your entire net worth .

Your bankroll should exist outside of your necessary expenses housing , food , insurance , whatever . Those aren't part of your bankroll . It exists outside of that . If you want it even more , conservative , retirement planning , et cetera . Let's not put our livelihood at risk here . So a bankroll isn't A your balance at one site , b your loss limit .

C your entire net worth . What is a bankroll ? What is my bankroll ? Let's first define if you have a finite or replenishable bankroll . A finite bankroll is this is the amount I have devoted to gambling . If I lose that amount , I will never gamble again . That's not doable enough . Over replenishable bankroll is a bankroll that you know you'll be adding to .

You know adding some money to from outside sources Could be every month , every week , whatever . And a good example of this is let's let's take someone who is Interesting , getting into sports betting . They're like , okay , I'm gonna set aside a thousand dollars right now and then Each , you know , bi-weekly , like each paycheck .

Let's say you know I cover all my expenses instead of you know spending $200 on dumb shit . I'm gonna put $200 into my sports betting bankroll . As I learned , that person has a replenishable bankroll . They've gone and kind of mapped out the schedule at what they believe their replenishing rate will be .

It's very hard to determine a bet size when you have a replenishable bankroll , but just as a rule of thumb , with a replenishable bankroll you can bet more than if you have a finite bankroll .

So the bet sizing for two people who have an $1,000 quote-unquote bankroll but one of them has to replenishable bankroll , they're gonna be betting more than the person who has an $1,000 finite bankroll . So what does this mean for you ?

Well , let's right now do this exercise with me and Think of how much money I want to set aside for gambling you know , what can I afford to set aside and then Say is this a replenishable bankroll or is this a finite bankroll ?

And Right now we should have a good idea of a what our bankroll is and Be if it's finite or replenishable , and then we can move forward from there . Next up is unit size . Unit size is an attempt to standardize bet sizes amongst betters who have different bankrolls .

For example , let's say you have a professional sports better who is betting $10,000 on a bet and a Recreational better who is like the friend or maybe getting some advice from them , wants to know how much they should bet on the same bet . The $10,000 better might be betting 1% of their bankroll .

So what they would say is or what they should say is a unit equals 1% of my bankroll and betting one unit . So now the recreational better knows okay , I'm gonna bet 1% of my bankroll . Maybe their bankroll is $1,000 . They bet $10 , right ? The problem is there's no standard unit size , like a unit doesn't necessarily equal 1% .

Yet people will still Talk in terms of units . So I think it's very confusing when you hear people saying oh , this is a three unit bet , a five unit bet , because I don't know . Your unit says , and Most of the time some people will say this is my unit size , my one unit equals 1% of bankroll .

That's fine , but I think we need to think in terms of percent of bankroll Instead of unit , because I think units and unnecessarily confusing .

Extra step Now we get to get into the meat of this discussion and determine how much we should be betting , how , what percentage of our bankroll we should be betting on a given bet , and To determine this pretty much everyone who's involved in betting sports betting , poker Trading , hedge fund managers , whatever .

They use this formula called the Kelly criteria , and I'm gonna give you the basics of the formula , but I don't want to get too bogged down in the math . We're gonna try and understand the concepts without really going too into depth , but just as an overview .

The Kelly Kelly criterion is this the fraction of your current bankroll that you should place on a wager is equal to the probability of your wager winning minus the probability of your wager losing , divided by the European odds minus one . What the hell does this mean ? Well , let's do an example so we can see this in practice .

It's actually not as confusing as it sounds . Here's the conditions of this example . We have a 50-50 payout bet , so plus 100 in American odds , 2.0 in European odds . On a platform like PrizeFix , this would be a 2x bet . A 2x bet , we think we have a 60% probability of winning this bet . What fraction of our bankroll should we bet on this bet ?

To get the fraction of our bankroll we should bet here , we take our probability of winning . We perceive it to be 0.6 , 60% . Then we subtract our probability of losing 0.4 divided by our European odds , 2.0 minus 1 . So it would be 0.6 minus 0.4 divided by 1 , which is 0.6 minus 0.4 , which equals 0.2, . 20% of your bankroll should be bet on this bet .

Don't start betting 20% of your bankroll on bets . Okay , this is just a very basic example to show you how Kelly works . What's more important than the Kelly formula are the rules of thumb that we can take away from it . I think there are three key rules of thumb when it comes to Kelly .

Rule number one if you assume you have the same edge per bet , you're going to be betting to win the same amount each time you bet . What does that mean , or what's the implications of that ?

Well , it allows you to quickly , in your mind , compare two bets and get a relatively good idea of what you should be betting If you're just thinking in two win amounts . We got a switch from bet amounts to two win amounts . If you're keeping your two win amounts the same , you're not going to go too wrong .

That's a quick rule of thumb to quickly size a bet . An example of this is let's say you have a 50-50 bet , it pays plus 100 , and Kelly says you should bet $50 on it to win $50 in profit . We're thinking about a profit amount . Now let's say that we find a plus $400 bet , that we assume we have the same edge on as that plus 100 .

How much should we be betting ? Well , we should still be betting to win $50 . How much would we be betting then ? It would be a $12.50 bet at plus $400 would yield a profit amount of $50 if we win . That's how we would quickly compare how much we should be betting . We go from 50 at the plus 100 in bet size to 12.5 in the plus 400 in bet size .

We can quickly understand about how much we should be betting when we start thinking of bets in two win amounts . The second key takeaway of Kelly is the higher your advantage , the higher your edge , the more you should be betting .

This is where a lot of people who are new to bet sizing will get themselves in trouble , because it's very easy to overestimate your edge . It's very easy to justify a higher bet size by saying oh , I have such a huge edge , be careful with this one . Remember that is a key tenant of Kelly .

Bet sizing is when you have a higher advantage , when the bet is what you would call like a 9 out of 10 , a 10 out of 10, . You can size that up a little bit compared to , maybe , a bet you see as like a 5 or 6 out of 10 , but still worth taking . And the third key takeaway that we can get from Kelly this is the most important one .

This is the most important rule of thumb that Kelly teaches us is that the punishment for underestimating your edge is lower than the punishment for overestimating your edge . If you underestimate your edge when you're sizing your bets according to Kelly , you are , at worst , just leaving some money on the table and yeah , that does suck .

I mean , we do always want to consider money earned , but that's the downside is you leave some money on the table If you overestimate your edge . The downside is you're 100% going to go broke . You're 100% going to go broke if you overestimate your edge .

That is why it is so crucial to always be very conservative when estimating your edge and when sizing your bets . Most professionals will use a frack actually , not even going to say most . All professionals are using a fraction of Kelly , so they won't bet the full Kelly amount . In our previous example , that would have been 20% .

They're going to be what they call half Kelly , quarter Kelly betting . In that example , that would be 10% , 5% . Whatever we use quarter Kelly , I think it's insane to use anything above half Kelly absolutely insane . And I think half Kelly is also insane too .

And the reason is when you're using a fraction of Kelly , you're protecting yourself against A overestimating your edge . B having the market shift against you and you not have an edge anymore and it costing you too much money to find that out . And .

C your emotional well-being is going to fluctuate too much when your bet sizes are such a high proportion of your bankroll . Let's get out of Kelly , let's get out of the math and let's actually get into an example on prize picks , which is the site that I think most of you that are listening or using , and then we're going to be able to see this example .

Take it , apply it to the variety of bet types on prize picks and have at least a 95% confident understanding about what our bet sizing should be . This prize picks example is going to be from a two leg power play . A two leg power play on prize picks is essentially a two leg parlay that pays plus 200 American odds .

I'm going to give you a few assumptions and we're going to figure out how much we should be betting here . First assumption that we're going to be we assume that we're going to have a 60% win rate on each of the props . 60% win rate on each of the props this is tough to achieve . It's achievable in prize picks , but this is an aggressive assumption .

Let's remember this . Assumption number two we're going to look at this in half Kelly bet sizing . Now remember I was telling you before half Kelly is like the absolute most aggressive sizing I would do when I was thinking about seriously betting . Then assumption number three is we have a bankroll of 1,000 .

Now take a second or two here and think about what you think . The answer is this will be a good way to gauge how your natural instincts are around bankroll management compared to the reality .

If you had a $1,000 bankroll and you were a very , very strong player who was getting 60% on props , how much would you be betting on a two-pick power play on prize picks ? Take a second , say your answer . Now , if you do the half Kelly , the answer you get is $20 . You should be playing betting $20 on this .

I assume that that is low , lower than at least the guess you made . $20 is with extremely aggressive assumptions . I'm going to say , $20 here is the absolute ceiling .

If $20 is the aggressive assumption and this is an assumption on a finite bankroll then if you have a finite bankroll of 1,000 , in that scenario maybe you want to be sizing more towards $10 or $15 , especially if you feel like your win rate might not be 60% yet per prop . Now this is a finite bankroll .

If you have a replenishable bankroll , it goes the other way that $20 might turn into $40 or $50 , as long as you're being honest with yourself about the replenishable nature of your bankroll . That's where it all ties together and we put into practice determining a bet size

. There's obviously other bets on prize picks besides the two power . I actually have created an outline , a one page or outline of what our bet sizes should be as a percentage of our bankroll for all of the different plays on prize picks . I'm going to release that on the discord to everybody who's a horse track junkie or higher .

It's going to be yours to reference whenever making your bets on prize picks . So I hope that helps . If you're not in the discord and you want to get that , hop in and start chatting . It's not too hard to level up to the point where you can get this document .

If you are on the discord but haven't , you know , leveled up yet , join Zeeley , complete a couple , a couple quests that you can do it within 30 minutes . Probably within 10 minutes . You can probably get enough XP to reach the level where you'll receive this document . So hop in .

I'm always in there , so hit me up if you have any questions , and I appreciate you for listening .