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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.
In this article, I’m going to explain variance in sports betting, how it affects your results and some practical ways to reduce its impact on your betting bank.
What is Variance in Sports Betting?
So what is variance, and how does it affect our betting strategy and our expectations of success?
In simple terms, variance describes how much your results can fluctuate around what you would expect over the long run.
Think of it this way: if you are betting 50/50 even money bets over a very large 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!).
Probability Question
In a sample of 1,000 independent 50/50 bets, what is the chance of experiencing at least one losing run of 6, 7, 8, 9, 10, 11, 12, or 13 bets in a row?
Answers are at the end of the article!
A strategy built around genuinely high probability, shorter-priced selections will usually have a higher strike rate and shorter losing runs than one targeting big-priced outsiders.
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 get off to a flying start with a strategy and assume the results will always be that good. Understanding variance reminds you that short-term results can run well above or below expectation without the underlying strategy having changed.
The same applies to a poor start. A losing run doesn’t mean a winning run is “due”, but if you have good evidence that the strategy has a genuine edge, variance can help explain why short-term results may differ considerably from long-term expectations.
Crucially, it also helps you set your bankroll and stake levels accordingly.
Your staking should reflect the expected volatility of the strategy, the size of your betting bank and the strength of your perceived edge. Higher odds strategies will generally require a larger bank to cope with longer losing runs.
However, this is all based on the assumption that your strategy has a genuine edge.
If you were betting randomly at evens at the bookmaker, your strategy is doomed to long-term failure anyway.
Ways to Reduce the Impact of Variance
1) Volume
If you have a genuine edge and can find enough good betting opportunities, a larger sample can make short-term swings less significant relative to your overall results.
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 individual winning and losing streaks have less influence on his overall monthly result because they are spread across a much larger number of bets.
2) Staking Sensibly
Sensible staking won’t remove variance, but it can stop normal losing runs from doing serious damage to your betting bank.
The higher the odds and the lower the expected strike rate, the more room you generally need to allow for losing streaks.
For example, I use larger betting banks for my horse racing and golf bets than I do for football because I’m often backing much bigger priced selections.
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) Be Selective About Marginal Edges
Not every bet that appears to offer a tiny edge is necessarily worth taking, particularly when your estimate of fair value is uncertain.
For example, if I identify several strong value golf bets alongside a few selections that only just scrape past my minimum EV threshold, I may leave the marginal ones alone.
That isn’t because a 5% EV bet is inherently bad, but because small estimated edges are more vulnerable to errors in your pricing model.
4) Hedging Your Position
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!
The key is that the strategies should be genuinely different. A football strategy, a horse racing strategy and a golf strategy may all behave differently at different times.
Running four very similar football systems, on the other hand, may not give you much diversification if they are all exposed to the same kind of results.
For example, a football strategy, a horse racing strategy and a golf strategy may behave differently at different times. But running four almost identical football systems doesn’t necessarily give you much diversification.
6) Avoid Chasing Losses
One of the worst reactions to variance is changing your staking because you feel a win is due.
A losing run can tempt you to increase stakes to recover faster, but that simply magnifies the effect of the downturn and can put the whole betting bank at risk.
If your strategy and staking plan were sensible before the losing run started, variance alone isn’t a reason to abandon them.
Conclusion
Variance is unavoidable in sports betting, but understanding it makes losing runs much easier to put into perspective.
The aim isn’t to eliminate every swing in your results. It’s to use sensible staking, enough volume, diversification and a realistic betting bank so that normal variance doesn’t knock you off course.
Most importantly, none of this matters unless the underlying bets have a genuine edge. Variance can explain why a profitable strategy loses in the short term, but it can’t turn a losing strategy into a winning one.
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!
Solution to probability question
Percentage chance of losing x amount of bets in a row at evens in a sample of 1,000:
