Successful Betting Systems require Successful Bankroll Management

Behind every great Betting System is a great Bankroll Management

No matter how winning your value betting system is if you do not have a proper bankroll management.

Along the way, there will be unavoidable losing runs. Those losing runs already happened in the past despite the positive returns of a system.

However, bad runs are nothing to worry about if you can face them.

Protect yourself by knowing the worst-case scenario that you can face.

It is always better to build the ark before the rain comes.

To thrive with your system, you must first survive with your bankroll.

Uncle Point

What is the maximum level of pain that you are willing to suffer?

It is the Uncle Point: the maximum number of units of your bankroll that you can afford to lose for investing in a betting system.

In other words, the maximum percentage of the bankroll that you are willing to lose.

The better you define the Uncle Point, the better you can choose your system.

Maximum Drawdown

To determine if a betting system is suitable for your Uncle Point, the Maximum Drawdown (MaxDD) is an excellent starting point.

By knowing the Maximum Drawdown of a betting system, you know the size of the largest downswing to date, from its peak to its lowest point.

In this way, you can assess if the Uncle Point has a wide margin of safety on that largest drop and protect the investment so that the Uncle Point is far less likely to be hit.

Consequently, you reduce the chances to miss the positive expected returns of a system due to an early exit from the investment and there is also enough money to keep betting at the same pace without changing the staking plan.

For all those reasons, a solid Uncle Point must have an additional units number well above the MaxDD of a betting system.

Even more so, if the system is in the early stage because the small sample size could not provide a reliable MaxDD. Also, the lower the yield and the longer the odds to bet on, the greater the effects of variance. 

It’s like playing loose-aggressive poker at a table where you have a tiny edge.

You will be out of games in no time without a wide margin of safety.

Just as Warren Buffett would not cross a bridge that can hold 10,000 pounds with a 9,800 pound vehicle over the Grand Canyon, I would not get into an elevator that can hold 600 pounds with two heavyweight boxers.

And not because I would be in awe.


 

Bonus Track

Run this betting simulator and get the expected variance of a betting system with the bankroll growth in the future.