Thursday, September 24, 2009

Calculating Initial Bankroll

The first decision you make as a professional sports trader is to calculate the size of your initial bankroll.
This task is like tackling a 'chicken and egg' problem. On the one hand, you need to know your average strike rate in order to calculate a starting bankroll. On the other hand, this is difficult to accurately assess before you begin to trade. However, assuming you can generate a conservative estimate of the strike rate, Peter Webb provides a simple formula:
  LLR = ROUND(LN(NumBetsPerYear)/-LN((1- 
for calculating the longest expected losing run relative to strike rate. Using this value, initial bankroll can be calculated, as follows:
  IB = ((LLR * 2) * UnitStake)
For example, with a projected 25% strike rate and an average number of bets per year of 1000, you can expect a longest losing run of approximately 24 so, given a unit stake of $25, the recommended initial bankroll is (24 * 2 * $25) = $1,200.