Why your staking method is important
There is a strong case to suggest that the amount you bet is actually more important than what you bet on. We reviewed five popular staking methods. Discover which is best.
Professional blackjack player and author Ed Thorp was a successful card-counter. Too successful, many would argue, as his ability at the tables of Las Vegas’ biggest casinos lead to the implementation of multiple decks and the start of a war on card-counting.
Despite his expertise as a professional gambler – he published two books on the subject – he attributed the majority of his success to a staking formula created by mathematician John Kelly Jr. “Playing strategy is maybe a third to a quarter … of what you’re going to get out of it. Betting strategy may be two thirds or three quarters”.
As you can see, one betting system provides far greater returns than the others, while one drops you out pretty quickly.
The five systems are outlined below – which letter do you think each line corresponds to?
Strategy 1: Bet everything, every time
Bet your entire bankroll on each bet. The advantage is that you get big returns, fast. The downside? As soon as you lose, you’re out of money and out of the game.
Strategy 2: Fixed wager
Bet a fixed amount for each bet, and don’t vary no matter how much you win. In this example, it was $100. If your chance of winning 55% on a 2.000 bet, this method means you’ve dramatically reduced your chance of losing your entire stake. Unfortunately, it means your winnings are limited to increase in a “slow and steady” fashion.
Strategy 3: Martingale
Bet double your stake after any failed bet, to cover your losses with the next bet’s winnings. This gives a quicker increase than fixed wagers (as you’re doubling up to cover any losses). If you experience sequential losses, however, the required stakes continue to double, and you’ll very soon be betting large amounts to cover your losses.
Strategy 4: Fibonacci
Increase your stake in a Fibonacci sequence, to your losses with the next bet’s winnings – learn more about the Fibonacci sequence here. This method has similar drawbacks to Martingale, but it reduces how quickly the stake increases if you’re on a losing streak (and therefore also reduces the rate at which you win).
Strategy 5: Proportional betting
Bet a fraction of your bankroll in proportion to your edge. In this simulation, we used the Kelly equation for proportional betting. In Kelly, your bet should be your edge divided by the odds. In this example, as the edge is 10% and the odds are evens, 10 / 1 is 10.
Therefore 10% of the $1000 wallet should be bet: $100. Should that bet be successful, the next bet would increase to $110, 10% of the new $1100 wallet. This means winnings increase quicker than in the fixed-wager system, and losses slow down.
The correct answer is:
A. Bet everything
C. Fixed wager
D. Proportional Betting
As you can tell from the descriptions above, proportional betting appears to have a natural advantage over the others systems. Imagine you’re down to your last $100 – you’d be betting $10, (and decreasing), keeping you in the game for much longer than a fixed-bet system, where your last $100 would be your last bet.