Money Risk Management

Money management is always based on

1. How many percent of your account you are prepared to risk per bet

2. Current account size

Strictly maintaining this discipline has served me very well and helped me compound my betting account several time over!

Every punter must guard himself against the drawdown, which refers to the percentage drop in his account size after one losing bet or consecutive losing bets.

For example, imagine that after losing a few bets in a row, your $20,000 account is reduced to $12,000: that would be a drawdown of 8,000/20,000 = 40%

If I were to ask some new punter: “In order to be back up to $20,000, what percentage return do you need to generate?”, many would answer, “Since I lost 40%, I have to make back 40%”

This could not be more wrong! Note that after losing 40%, the punter now starts with a lower base, i.e to undo the $8,000 loss, the return he needs to generate is 8,000/12,000 = 67%

The more severe the drawdown, the harder it becomes to undo the damage, as shown in the chart below:

A severe drawdown cases you to have to start with a much smaller base, thereby having to take higher risks to undo the damage. This is why many undisciplined punter, who do not systematically plan their bet amount, find themselves going into a “downward spiral” when they suffer severe losses.

This is why I risk no more than 3% of my account size per bet. In fact, new punter might want to risk no more than 1.5% to 2% of the account size in any one bet. Sometimes, even with higher confident picks, you might suffer three or four consecutive losses. You need to ensure that the emotional impact of the resulting drawdown does not damage you too much, so that you can recover from the losing streak. This cannot be over-emphasized, for it distinguishes the profitable punter from the losing ones!