Jul 16, 2021
To make money gambling you must be placing bets that have a greater possibility of success than the odds at which you back them at. Over time good luck and bad luck will itself out and it could be the sum of these probabilities that decide your fate. If you do indeed have a benefit in the bets you place, you ought to win money. I use the word should instead of will for a simple reason. It is possible with an edge on every bet you place but nonetheless lose money. Sounds implausible? Bear with me and Ill explain.
Lets say your Betting Bank is €1,000. Your kind bookmaker offers you 2.05 on heads in a coin toss. This offer can be acquired for 50,000 coin flips, but you can only use your original bank, and if you lose it, youre done. Just how much should you bet? You edge isnt huge, but is very real, and with proper Bankroll Management should bring about huge profits following the 50,000 flips.
I set up a Monte Carlo spreadsheet to investigate. Excel features a random number generator which I use to simulate the toss of a coin. I enter the possibility of success of 50% and the odds Im getting of 2.05 and it will generate a 1 for heads and 0 for tails. I also enter my betting bank as €1000 and the percentage of my bank that I desire to stake on each bet.
To begin with I enter to return 10% of my betting bank on each bet. With my bank at €1000 and my odds 2.05 this could mean a stake of €48.78 on the first bet (Im staking to return €100 which can be 10% of my bank). My stake is thus only 4.87% of my bank which might seem reasonably small considering Ive a 50% chance of success. I graph the results after each and every 1000 bets. In this run my bank increased to €209,995 after 37,000 flips. Youd therefore presume that betting to return 10% of your bank is how you can go. Alas a huge down swing happens right after and my bank hit a low of just €46 after 48,000 bets. It recovered slightly to €290 following the 50,000 coin tosses.
I hit refresh to create another pair of random numbers and this time around my gambling software bank peaked at €5,200 after 2,000 bets but went downhill and was just €1.18 after 50,000 bets. Both times the entire strike rate ended within 0.1% of the expected 50% which should ensure a profit as getting odds of 2.05 I only require a 48.78% strike rate with level stakes to break even. I ran it a few more times and every time I ended up with less than my starting bank after 50,000 bets. The explanation for the massive fluctuations in the financial institution is that I was staking to high a percentage on each bet so the inevitable bad run will decimate my bank, regardless of fact Id a standard edge on the bets. In the first run everything went smoothly for 37,000 bets which would lead most to trust their method was a safe one. When things are getting so well its hard to trust a down swing could possibly be so bad to bust you, especially with such a big sample size. This example implies that having a profitable angle isnt enough if your bankroll management is bad.