Sports Betting Guide

The risk of ruin in sports betting

The concept of the risk of ruin has been adopted by the sports betting community from finance and investing, but what exactly is it, and how punters can use it to remain in the game for as long as possible. Let us find out together!

risk of ruin sports betting tutorial

Introduction

Let us start this sports betting guide by explaining what the risk of ruin concept is. In plain language, the risk of ruin is the risk of losing it all. In reality, the chances of going bankrupt are always there, according to the statistics. Well, the problem is that the average market stats of going bankrupt cannot be applied to a single bettor. The reason behind it is that the market average is the ensemble probability, which deals with a collection of punters, and your personal statistics is called the time probability, which represents the single person activity over time. As you can see, those are two completely different things! Nevertheless, market forecasters & tipsters are still claiming that they are making quite accurate predictions & forecasts. While it could be true, in reality, there is no chance for a bettor to achieve the exact same expected returns unless they are in possession of an unlimited or quite a substantial bankroll. Note, «quite a substantial bankroll» won’t keep you save from going bust but only postpone that moment.

That is, however, only in theory. Real punters will readjust their staking and turn to all sorts of betting strategies and mechanism to limit their losses and increase profits, which at the end of the day won’t give you the initially expected market returns anyways. Luckily, sports betting allows much room for gaining the edge by being able to determine outcome probabilities better than online bookmakers & their oddsmakers. People call it differently, some say it is finding value, others - beating the bookie. However, it is the same thing. Nevertheless, while the risk of ruin can be substantially mitigated, even professional punters can easily become a part of this undesirable stat sheet, especially when hitting the slump.

How does the concept apply to advanced punters?

As you might have already learned from our sports betting guides, betting on sports is a unique combination of luck & skill. The share of either one is completely unknown, however, statisticians and betting experts around the world are constantly trying to determine the way of evaluating both components. While there are not too many ways of determining how much skill a bettor got, there is one formula that can bring us one step closer to finding out something about the predictive ability. It is called the t-test, and what it actually does is telling us the likelihood of profits & losses when the only force affecting them is luck. This does not necessarily tell us how skilful the punter is, however, in the case of a small share of luck affecting the results, we can make an assumption that something besides it is in the mix.

Unfortunately, such a way of estimating your betting skills is not quite accurate and simply is highly bias-prone. It is quite common that we get to analyse only the best results from the market. People tend to avoid averages and, moreover, negative results. This is called survivorship bias, which we have already explained in one of our previous betting tutorials.

How likely are you to go bust?

So, is there an actual way of telling how like are you to face ruin after a series of bets? Well yeah, but there are many things that go into such a calculation. For example, how skilful or lucky a bettor is, how long is are going to bet for, what odds & stakes are we going to work with, etc. Obviously, the better is the punter, the less likely they will zero out their bankroll.

Having said that, let’s talk a bit about some of the aspects we have to keep an eye out for. Let us start with the odds, the longer they are, the wider the range of outcomes that could possibly happen. That being said, our profits, as well as losses, would be potentially bigger. However, the risks we take (including the risk of ruin), assuming all the things remain constant, will also be greater. Consequently, the greater stake we use to bet with will correspond to the greater chances of going bankrupt if the losing streak comes about. Moving on, the longer your odds, the bigger your returns are going to be. However, looking at the same case from a different perspective, we can say that in the case of longshots, your results are more affected by luck rather than anything else. Just to avoid making strong claims, let’s just say the share of luck would be greater.

Online Sports Betting Guide: How the fear of losing affects your chances of winning

How the risk of ruin affects your betting?

Let’s move on and discuss how the risk of ruin affects your profits. Before we start, we would like to mention that your expected profits and your absolute profits are two different things, and here is why. Assuming we have a set likelihood of the ruin (1% or 2%) and two punters who bet on longshots and strong favourites (short odds). Once again, assuming the starting bankroll is the same, the longshot punter would have to decrease their stake to about 1 unit, while the short odds bettor would be allowed to wager with about 5-7 units. Keeping that in mind, both bettors will end up with similar absolute profits, despite having quite different profit expectation at the beginning (longshot punter will substantially higher expected profits).

Using the same example, let’s increase the risk of ruin to around 20-25%. Doing so will immediately cut the longshot punter’s odds, however, keeping them still at quite a long level; and thus, allowing for a higher stake of a couple of units (5). On the other hand, the short odds bettor would be able to bet at slightly longer odds (however, practically the same as in the previous example) and also a bigger max. stake of about a dozen units. Just like in the example above, the expected profit would be way higher for the longshooter and the favourites bettor, however, they will both end up with the same or extremely similar absolute profit outcome.

Analysing these two examples, we can clearly see and conclude that there is little to no difference between what odds and what stakes you bet with, assumed bettors are of the same skill bracket & equivalent risk of ruin is implied. While betting at long prices seems quite lucrative and theoretically offers more potential returns, there are higher risks of losing it all, and thus, punters are forced to mitigate such a threat by reducing their stakes.

Betting strategy - setting a goal

Another point worth mentioning is the profit expectancy and the way the risk of ruin affects it. This is the point where the risk of ruin is closely obstructed with the survivorship bias. The reason behind it that when calculating the profit expectancy, we do not consider the fact that not all the betting sequences will last the entire series of bets we put them through. Thus, we make quite an inaccurate assumption that all the entries will «survive», however, in the case of the non-zero risk of ruin, it is simply impossible in the long run.

A simple test will show you that at a certain likelihood of ruin, set odds, stakes size and whatsoever, almost all the «ruined» entries will show some pretty decent returns. Once again, those are entires that face the ruin, which in reality would make no sense, because after going bankrupt, there is no further betting, and what is more, profits from it.

Hopefully, it will help you choose the right path for your betting journey. Remember that something like the risk of ruin is always around, and your task is to minimise it to the lowest expand possible. If you would like to learn more about how to stay on the float in sports betting and start making profits, please check out our sports betting guides library and find information about the most efficient ways of achieving success in this field.

Summary

Hopefully, it will help you choose the right path for your betting journey. Remember that something like the risk of ruin is always around, and your task is to minimise it to the lowest expand possible. If you would like to learn more about how to stay on the float in sports betting and start making profits, please check out our sports betting guides library and find information about the most efficient ways of achieving success in this field.

Betting strategy - how to gain an edge over the bookmaker?

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