Today, we’ll be talking about the basics of an extremely important aspect of trading in sports – bankroll management.
The article is part of an ongoing series on educative sports trading topics and on treating the sports betting market as an investment opportunity:
”Investing is the act of allocating capital to assets with the goal and expectation of generating a profit. Good investing involves research, risk analysis, managing capital responsibly, and diversifying investments. Successful investors follow a long-term strategy or a system that matches their goals and tolerance for risk, and they follow that system non-emotionally.”
If you are wondering how much you should initially invest or how not to lose your investment by making trades that are too big, then this one’s for you!
Be honest with yourself about your investments
Let’s begin with a very basic sports trading mindset – the first thing we listed when we talked about the 5 key rules for success in the field – setting realistic expectations:
There are no get-rich-quick schemes in life that actually work. While you should aim and expect to be generating very good returns in sports trading, the fact is that it will require time and effort.
Our systems generated incredible ROI’s last season – 173% in baseball and 168% in football. Those are some crazy numbers when you compare it to any other type of investment opportunity that’s out there. And while some have been able to ride the wave with crypto currencies or cannabis stocks and had similar gains before the valuations plummeted, most jumped in way too late and ended up losing money. Our models have been returning these types of profits for years and years.
So, while sports trading can be amazingly profitable and your expectations can be high, they should also be realistic. Think about how much time and money you can allocate, educate yourself, and start with a commitment you are comfortable with.
A part of being realistic about things is also asking yourself the question – how much am I comfortable with initially investing in sports trading?
While our ScoreMetrics sports trading systems are built in a way that pretty much guarantees that investments will not be lost if the system rules are strictly followed, the answer to the question above should still be the sort of sum of money that does not cause you sleepless nights. Inevitably, there will be volatility, and at some point, your sports trading bankroll will temporarily show a negative return.
But just like in the stock market, that does not mean that you are losing. Volatility is the price you have to pay for any investments that will eventually turn truly profitable. It’s the long-term view that matters, and the results of your trading success should be measured at the end of the season, not on a daily basis.
But if you can’t handle watching a $50k investment temporarily go down 20%, don’t invest $50k.
Be mindful of unit size and trade frequency
Setting the right unit size (in other words, the amount of dollars you invest in a single trade) is extremely important when building a sports trading system.
Even if you have discovered a great profitable pattern in the sports betting market, investing the wrong amount per trade could see you either lose your investment due to volatility, or end up with marginal gains due to making trades that are too small compared to your bankroll and target returns.
Some things to consider: How often will you be conducting trades, how many per season? What sort of volatility are you expecting, or how many units should you expect to “go on the minus” at the worst-case scenario? Do you want to give different weights to the different types of trades you’ll be conducting? And are you perhaps looking to increase unit sizes over time to achieve compounding effects?
These are the sort of questions you need to answer when assessing the size of your trades in relation to your overall investment in sports trading, and these are also factors that are carefully considered in all of our ScoreMetrics sports trading systems.
For more on sports trading basics, check out these articles from ScoreMetrics Labs:
To take advantage of the return of sports and to learn everything you need to know about smart investing in the sports betting market, check out our head trader John Todora’s new book – “Zero Correlation Investing – The Score Metrics Secret”. It’s currently on sale for a limited time, so go get yours now!
The ScoreMetrics Lab is the engine that runs the Sports Trading System operation, consisting of a team of researchers and writers who are constantly testing and retesting algorithms. They work hand in hand with our Head Trader and Creator of ScoreMetrics, John Todora to help find new breakthroughs and develop new systems.