Variance in Sports Betting and How to Reduce it

When most amateur punters put their wins and losses down to luck on the day, anyone serious about their betting will instead curse the gods of variance.

What is variance, and how does it affect our betting strategy and our expectations of success?

Without getting into too much technical detail, variance is simply an indicator of how spread out a set of data is from its average

Think of it this way: if you are betting 50/50 even money bets, eventually over a huge sample, you should expect your results to be 50% wins and 50% losses (if there is no edge).

However, let’s say you have bet on 10 games this season. You could end up with 8 wins and 2 losses or 7 losses and 3 wins. This is variance in action.

You can see this for yourself by flipping a coin and recording the results. See how many heads and tails you have after 100 flips and how close it is to 50/50.

An interesting exercise is to see if you’re aware of the percentage chance of a losing run of 50% probability bets. See if you can guess (I definitely couldn't!).

In a sample size of 1,000 bets, what is the percentage change of losing 6, 7, 8, 9, 10, 11, 12, or 13 bets at even money in a row?

If you were betting at odds of 1.10, you would expect a lot less variance and a better strike rate. And conversely, the higher the odds you target, the higher the expected variance.

The reason variance is so important to stepping up your betting is that understanding it means you can deal with losing runs. It also gives you a gauge of where your strategy might be going right or wrong. 

You might be off to a flying start with a strategy and think the good times will last forever, but if you understand variance, you can also make the assumption that your strategy is ‘running hot’ and that a downturn is due to follow.

It might also be heartening for you to know if you’ve gotten off to a terrible start that better times are ahead.

Crucially, it also helps you set your bankroll and stake levels accordingly. You can afford to bet with a higher stake value on lower-odds selections, but you will need to reduce this as the odds you target increase.

However, this is all based on the assumption that your strategy has a genuine edge. In our value betting article, we discussed bookmaker margin.

If you were betting randomly at evens at the bookmaker, your strategy is doomed to long-term failure anyway.

Ways to reduce variance in sports betting

1) Volume

Assuming you have an edge, the best way to ‘flatten’ variance is by simply putting on as much volume as possible.

I have a friend in the betting space who bets on several hundred markets each day. This might not be realistic for some of you (it definitely isn’t for me!), but he very rarely has losing months.

The sheer volume of bets he places means the variance is flattened out over time, and any long winning or losing streaks will generally balance out. 

2) Staking sensibly

As mentioned in our staking guide, setting stakes according to your perceived risk level will help you minimise downturns and protect your bankroll.

For example, I bet on football, horse racing, and golf.

With my racing and golf selections, I work to a 150 point bank for each. 

This is because the odds I target (usually over 10/1 anywhere up to 500/1) are inevitably going to go through some very bad losing runs, but a winner will quickly recover the losing outlay from previous bets.

For my football bets, I can stick to a 50 point bank, and even then, that is on the conservative side, and it is very unlikely I would lose the entire 50 point bank.

3) Maximising your expected value (EV)

Of course, we should try to take value on our bets whenever we see them, however, sometimes bets that have only marginal value could be skipped.

For example, you have a golf tournament with 20 potential selections, 10 of them are strong value, 5 are very strong value, and 5 are marginal value.

You could perhaps skip the marginal value plays, especially if they are at high odds.

This is what I tend to do most weeks.

I have a cut-off where I only take bets that are 10%+ EV (or 110%+). This filters out some of the bets so that I don’t go crazy,  betting on too many things, which long-term won’t affect my profit that much.

4) Hedging

This might be debatable, as some people believe hedging "is just for gardeners" and you lose out on long-term profits if you hedge your positions.

However, if you are betting at low volume and you have a chance to at least cash in your initial stake on a position that is favourable, this helps to reduce some of the short-term risk.

It’s also a nice emotional buffer in case your golfer chokes on the last hole or a last-gasp goal ruins your bet.

5) Multiple strategies at once

Along with a higher betting volume, it's good to have a few strategies that run at the same time.

This way, if one strategy is going through a bad downturn, the hope is that others will pick up the slack in the meantime.

It’s still possible you could have 3 or 4 strategies all being shocking at the same time, and it has happened to me before. Be warned!

But long-term, spreading out your risk does make a difference, as with any investment portfolio.

Conclusion

Understanding variance is key to managing your betting long-term.

Without an understanding of how your results can vary over time, it is difficult to manage your expectations of what’s realistic with any given betting strategy.

Following the advice above and being disciplined and patient with your staking will be of huge benefit.

To quote Rudyard Kipling:

"If you can meet with Triumph and Disaster
And treat those two impostors just the same;"...

... then you're on your way to understanding variance!