Wagering 101

MONEY MANAGEMENT – AN OFTEN OVERLOOKED KEY TO SUCCESS

In combination with the ability to make winning NFL picks, money management is one of the biggest factors that determines an NFL football handicapper’s final success or failure at the end of the football season. Yet, money management is frequently overlooked, and by not exercising proper money management an NFL handicapper can wager on an overwhelming number of winning NFL football picks and still lose money. At the same time, despite practicing the best money management possible during the season, a pro football handicapper can still end up with a net loss because of his inability to pick winners. For truly successful football wagering, both the ability to make winning NFL picks and to exercise proper money management is essential.

What does money management mean? The concept of proper money management can seem obscure to those without a disciplined money management strategy already in place, but basically, money management involves controlling where and how much of your bankroll you put at risk throughout the season on a weekly basis. The objective, of course, is to manage your NFL betting in such a way that making a substantial profit is as easy and risk-free as possible. Of course, risk is unavoidable, and as a result, a proper money management strategy requires discipline and proper bet sizing to minimize risk, yet still make it easy to turn a decent profit.

Is Your Return on Investment as High as It Should Be?

Return on Invesment (ROI) is the rate of return on your wagers and is calculated by dividing the total amount won by the total amount risked. ROI should play a deciding role in your NFL betting strategy. In addition to making NFL picks and managing your bets, you also want to make sure your ROI is satisfactory for the amount of risk you incur. ROI is heavily considered in other aspects of life, such as investments, but largely and incorrectly ignored in relation to sports wagering. Why would you consider your ROI when evaluating your savings account, but ignore it when evaluating your wagering strategy? You shouldn’t…

When it comes to gambling on NFL football picks, NFL handicappers generally fall into one of two categories in regards to their wagering strategy:

1. NFL football handicappers who gamble on any NFL pick they believe offers a chance of winning which is greater than that needed to make a profit after accounting for vigorish, and



2. Pro football handicappers who are more selective and bet only on NFL football picks they believe offer a high probability of winning.

Throughout our site you’ll notice that we follow the philosophy of making quality NFL picks and wagering standard, fixed amounts on those NFL football picks – not adjusting wager amounts up or down to account for winning/losing streaks or NFL picks of varying quality. The reason we promote this approach, although some may attempt to dispute the idea, is that it’s the best way to maximize your return and minimize your risk. Although some professional football handicappers believe you should place a wager on any game that offers you a chance of winning that is greater than that required to breakeven after accounting for vigorish (approximately 52.4%), this is not the most effective approach to NFL betting. At first glance, it seems to make sense – if you can make successful NFL predictions at a rate greater than 52.4% (even if it’s only 53%), then place a wager. After all, if you wager on enough NFL picks throughout the course of the football season, you should eventually average that 53% success rate on NFL football picks you’ve rated that level of quality, and therefore make money in the long run. However, when wagering on every NFL football pick that beats the vigorish, an NFL handicapper has little room for error when betting on those NFL picks in which he estimates his chances of winning are only slightly better than 52.4%. Any inaccuracy in his handicapping, and he can easily lose those wagers. As a result, this approach can lead to a substantial amount of wagering without much winning.

For one thing, when wagering on every NFL football pick that beats the vigorish, a pro football handicapper will be betting on a sizeable number of NFL picks each week. However, in order to wager on a large number of NFL picks, the typical NFL football handicapper is forced to wager smaller amounts on each game so that he doesn’t risk losing his entire bankroll in just one or two weeks. Let’s face it - every NFL handicapper’s bankroll is limited and no pro football handicapper wants to chance being wiped out in just a couple of weeks. Therefore, in order to wager on a large number of weekly NFL picks during the course of the season, an NFL handicapper would require either an enormous bankroll, or smaller wagers placed on each NFL football pick. On the other hand, wagering on a fewer number of NFL football picks allows an NFL handicapper to wager a normal, or relatively larger, amount on each weekly NFL pick.

Let’s look at an example to bring all these concepts together. First, let’s say you can qualify your NFL predictions as to what your expected success rate will be. Some NFL football handicappers cannot. Second, suppose you have a $10,000 bankroll and do not wish to risk more than 18%, or $1,800, of your bankroll on a weekly basis.

Assume you wager on an average of 15 weekly NFL picks at $120 each (15 x $120 = $1,800) and your overall expected success rate is 55% (remember, if you are betting on every NFL play that has a chance of winning greater than 52.4%, your overall average rate of success will be lower because of the lower overall quality of the NFL football picks you’re wagering on). At 55%, you would expect to win 140 of your weekly NFL football picks and lose 115. Keeping in mind the winner pays the vigorish,* by the end of the 17 week NFL season, you’d net $1,473 [(140 x 100/110 – 115) x $120] – an average return on investment (ROI) per wager of 4.81% ($1,473 in winnings divided by $30,600 in wagers over the season -- $120 per wager x 255 wagers) and a return on investment (ROI) on your beginning bankroll of 14.73% ($1,473 in winnings divided by your $10,000 beginning bankroll).

Now, contrast this with wagering on weekly NFL picks that have a chance of winning of at least 60%. Because you’re being more discriminating, perhaps you wager on an average of just six weekly NFL picks at $300 each (6 x $300 = $1,800) for a total of 102 games for the season. At a 60% pace, you’d go 61-41 for net winnings of $4,336 (61 x 100/110 - 41) x $300], which is equal to an average ROI per wager of 14.17% ($4,336 in winnings divided by $30,600 in wagers over the season -- $300 per wager x 102 wagers) and a ROI on your beginning bankroll of 43.36% ($4,336 in winnings divided by your $10,000 beginning bankroll).

By wagering the same total dollar amount over a season, and wagering on fewer, yet higher caliber, NFL football picks, you’ll most likely win less NFL picks in total (61 vs. 140 in our example), but you should also have fewer losers and as a result achieve a higher overall rate of success and a higher ROI. A higher ROI, in turn, will result in greater net winnings. Review the example above again -- a 5% increase in your handicapping success rate resulted in a 195% increase in your net winnings. This is the power of incorporating ROI into your NFL betting strategy.

You can adjust this example and play with the numbers to come up with a different answer each time, but when doing so, keep in mind the two distinguishing factors between the approaches:

1. When wagering on all NFL football picks that have at least a 52.4% chance of being successful, the number of weekly NFL picks wagered on naturally increases while the average success rate decreases due to the lower overall quality of the group of NFL picks being bet on. Also, there is less room for handicapping error when betting on picks estimated to have probabilities that narrowly beat the vigorish.



2. When wagering on higher quality NFL picks that have a much greater chance of winning, the individual success rate of each NFL pick is better and the overall number of NFL football picks bet on are fewer because you are being more selective. At the same time, your ROI increases.

Of course, to thrive using the second approach, an NFL football handicapper must be able to successfully determine the quality of the NFL picks he makes. If a pro football handicapper is unable to distinguish an NFL pick that just barely beats the vigorish from an NFL football pick with a high probability of winning, then he will struggle to be successful. The key is not only being able to consistently make first-class NFL football picks, but also distinguish them from second-rate NFL picks that don’t offer the same likelihood of winning.

Using the Proper Wager Amount

In addition to wagering on every NFL pick that “beats the vig”, the biggest mistake when it comes to money management by NFL handicappers is constant changing of bet size due to winning/losing streaks. Winning/losing streaks affect everyone. The problem is that you never know when one is going to start or stop. Let’s illustrate why changing bet sizes is a major problem.

Let’s assume over the first three weeks of the season, you wager $100 each on 12 NFL picks and win eight out of 12. Your winning percentage is 66.7% and, eliminating the vigorish, your bankroll has grown by $400. You feel like you’re on a winning streak and decide to double your wagers for the next week to $200. However, the next week you only win one NFL football pick out of four. Now, for the season your winning percentage is over 56%, but in one week you’ve turned your net $400 winnings into nothing. You’re breakeven, and when you take the vigorish into consideration, you’ve actually lost money despite a winning record.

This same problem can happen in reverse as well. Let’s assume over the first three weeks of the season, you only win five out of the 12 games. Your winning percentage is 41.7%, and eliminating the vigorish, your bankroll has decreased by $200. Now, you feel like you’re on a losing streak and decide to halve your wagers for the next week to $50. The next week you win three out of four NFL picks, bringing your winning percentage up to 50% but you still have a net loss of $100. Ignoring the vigorish, you should be breakeven, but you’re behind due to changing your bet size.

The same problem arises for NFL football handicappers altering bet sizes based on “one star,” “two star”, “five star ”, “guaranteed locks”, and similar methods of ranking NFL picks. As long as those NFL picks are winning, it’s not a problem, but constantly changing bet sizes makes the win percentage required to breakeven fluctuate. If all your wagers on your NFL football picks are the same size, breakeven is approximately 52.4%, including vigorish. In the above examples, returning to your initial wager size of $100, you would have raised your breakeven point to 58.8% in the first example, and if you continued wagering $50 in the second example, your breakeven point would rise to 59%. Needless to say, this is a significant difference, and creates a huge obstacle to successful NFL betting.

Now, if you had perfect timing, you could increase your bet size at the beginning of a winning streak and decrease your bet size at the beginning of a losing streak. The problem is no one can predict when a winning/losing streak begins or ends until after it’s too late. If you had that capability, then you could just avoid betting altogether during a losing streak. You should have some expectation of what overall winning percentage you will end up with at the end of the season based upon your NFL handicapping ability and prior experience. So, by maintaining a constant bet size, you don’t hurt yourself by being forced to achieve an even greater winning percentage than what you’d ordinarily expect in order to be profitable.

Determining a standard baseline wager amount is crucial, but changing your wager amount based upon winning/losing streaks or differing confidence levels in NFL picks can wreak havoc on your ultimate financial success. Therefore, the best approach is to wager equal amounts on quality NFL football picks that offer a high probability of winning.

Determining Your Appropriate Bet Size

In determining your bet size, you must choose an amount small enough to withstand a losing streak, yet large enough to make a sufficient return on your bankroll. Start with taking 25% of your bankroll and imagine losing the entire amount over one weekend. Despite the disappointment of losing on every NFL pick you made that week, can you stomach the loss and not allow it to impact your actions or decisions the following week? If not, drop this percentage down until you get to a comfortable level. Now, take this amount and divide by your average wagers per week to determine your standard bet size. For example, with a bankroll of $10,000, a comfort level of 20%, and an average of five NFL football picks per weekend, the standard bet size would be $400 (10,000 x 20% divided by an average of five NFL picks per week).

Use this standard bet size as the amount you wager on each NFL football pick during the season. As discussed above, don’t change your bet size based upon the number of NFL picks that week or recalculate your bet size each week – it should remain fixed. Only in extreme circumstances should you adjust your standard wager amount during the season.

You can also use the following table to help you evaluate the adequacy of your bet size. Over the course of the season, a success rate of 57.5% will have an average ROI per wager of 9.77% (57.5% x 100/110 – 42.5%) after vigorish. Using a standard bet size that results in you wagering an average of 20% of your bankroll on a weekly basis results in turning your bankroll over 3.6 times during the season**. This results in a 35.2% (9.77% x 3.6) return on your beginning bankroll.

Amount of Bankroll Wagered Weekly Number of Times Bankroll Turned Return on Beginning Bankroll at Varying Success Rates 47.5% 50.0% 52.5% 55.0% 57.5% 60.0% 5% 0.9 -8.4% -4.1% 0.2% 4.5% 8.8% 13.1% 10% 1.8 -16.8% -8.2% 0.4% 9.0% 17.6% 26.2% 15% 2.7 -25.2% -12.3% 0.6% 13.5% 26.4% 39.3% 20% 3.6 -33.5% -16.4% 0.8% 18.0% 35.2% 52.4% 25% 4.5 -41.9% -20.5% 1.0% 22.5% 44.0% 65.5%

Instead of using the chart above, you can more accurately estimate the return on your total beginning bankroll by using the following formula:

% return on beginning bankroll = (ROI per wager at your expected success rate (quick reference table below) x your standard wager size x # of expected wagers over the season) / beginning bankroll

Using the example bankroll from above and an expected success rate of 57.5%, the return on beginning bankroll would be 35.3% (9.8% x $400 x 90 / $10,000), or $3,528.

Return on Investment Per Wager at Varying Success Rates 47.5% 50.0% 52.5% 55.0% 57.5% 60.0% -9.3% -4.5% 0.2% 5.0% 9.8% 14.5%

The above guidelines are provided to assist you in evaluating and determining the standard wager amount that best fits your wagering strategy in order to provide an adequate ROI. Determining what standard wager amount you should use requires careful consideration and analysis. However, do not become so fixated on generating a high ROI, that you forget to account for risk or stray from a disciplined strategy. (For greater detail regarding these tables, see our ROI tables for an expanded look of returns at varying parameters.)

Given the fact you don’t know beforehand which of your NFL picks are winners and which are losers, the safest money management strategy is to wager your standard bet size on each weekly NFL football pick throughout the NFL season regardless of winning or losing streaks. Equal wager amounts are important, and not only keep your required win% constant at 52.4%, they also keep your required win% as low as possible, making it easier for you to become profitable. Also, by staying disciplined and restricting your wagering to only high quality NFL football picks which you can successfully and consistently handicap, you can generate a higher ROI than you otherwise could by betting on every NFL football pick that “beats the vig.”


* the winner pays the vigorish – see our previous article, Pro Football Betting - The Basics

** Because the amount wagered per game (not per week) remains fixed, for our purposes, a season is calculated based upon a 17 week regular season with the playoffs counting as an additional full betting week for a total of 18 occurrences of wagering 20% of beginning bankroll.