One of the main reasons beginner sports traders fail is that they don’t consider that Sports Trading Bankroll Management is an important part of trading when in fact it is one of the keys to being a successful sports trader.
This article will look at the reasons why it is important to have good bankroll management when trading and also the different options you have to manage your Sports Trading bankroll.
What is a Sports Trading Bankroll?
A Sports Trading Bankroll is an amount of money that you are willing to put aside for trading sports online.
This should be an amount that you are willing to lose and it won’t cause you to lose too much sleep if you were to lose it all.
What is Bankroll Management?
Bankroll Management in Sports trading involves deciding how much you want to risk overall on your sports trading and how much you want to risk on each trade.
This is the total amount you are willing to risk on your sports trading.
This amount can range from as low as a €200 bank that a beginner might have to a €20,000 bank of a professional trader.
Whatever bank you decide to use for your trading, it should always be money you are willing to lose.
For beginners, I would recommend not starting with a bank bigger than €200 as if you can’t make a profit at this level, you definitely aren’t going to be successful using a larger bank.
Beginners often find it hard to do this as your profits per trade will be tiny but trust me when I say that this will save you money in the long run.
Once you are making profits consistently at this level, you can think about upping your bank.
Risk per Trade
Your risk per trade is the maximum amount of liability you will have on any one trade.
There are a number of different staking plans you can use to manage your risk per trade including a level staking plan, a percentage based staking plan and more advanced staking plans like the Kelly Criterion.
Level Staking Plan
A Level Staking Plan is probably the most straightforward staking plan to use as it is easy to implement as you simply place the same stake amount on every trade.
The amount you select should be small when compared to your overall bank (preferably less than 1/20 of your bank).
Percentage Based Staking Plan
A percentage based staking plan is probably the most popular staking plan that is used by beginner to intermediate sports traders as it involves reducing your stake after you have a losing trade and increasing your stake after a winning trade.
By following a percentage based staking plan, you will reduce your losses if you have a long losing streak and will increase your profits if you have a few wins in a row when compared with a level staking plan.
For beginners, it is best to stick to 1% risk per trade but some more experienced may risk up to 5%.
It is important to maintain discipline when using this staking plan as it may be tempting to increase your stakes if you have had a few losing trades in an attempt to make back your losses faster.
However, this is a recipe for disaster as it will only result in you losing more money.
The Kelly Criterion is a formula you can use to work out the ideal stake size to maximise the expected value of your trade.
The Kelly Criterion takes into account the probability of winning or losing a trade and also the amount gained from a winning trade to determine what stake size you should use.
There is some debate on whether the Kelly Criterion is useful for gambling and it is not something I would recommend beginners to use as I believe it overcomplicates things.