Saturday, Oct. 19, 2013

Managing Your Spread Betting Bank

Any disciplined gambler or trader should always work with a betting bank which they will try to protect at all costs. The funds used for your bank should ideally be “money you can afford to lose”, but provided you are splitting your bank properly and only risking a small percentage in each trade, that worst case scenario should never materialise.

There are plenty of great minds on LTO who can advise on this from a fixed odds or betting exchange viewpoint, but I want to take a few minutes to explain how it works in spread betting.

The rub with the spreads is that you can win and lose multiples of your stake, so it makes splitting your bank a bit more complicated than in other gambling mediums, so let’s see if we can make sense of it.

Spread markets can be measured by degrees of volatility, and those that are most volatile require extra attention when establishing your stakes. Also, there can be different approach to buy bets than sell bets, because the maximum downside on some positions can technically be limitless. Or, can it?

Well, it depends, is the answer to that. It depends on where you place your bets, as all 3 sports spread betting firms have different rules on stop losses. These are used as a matter of course by most city or currency traders, but are not available across the board to spread bettors.

The most punter friendly deal is courtesy of Extrabet, who operate a generous stop loss/no stop win policy, which is great. Sporting Index have a stop loss/win rule, which seems perfectly fair to me, but I’m sure they could make themselves even more popular if they adopted Extrabet’s rules. I feel a campaign coming on! (Sporting do also offer a no stop loss account on request).

Spreadex do not operate stops either side on any of their sports accounts.

It’s important to appreciate though, that despite all this talk about stop losses etc., in reality, they don’t happen very often. I’ve placed hundreds of spread bets over the last 10 years or so, and I think a stop has only come into play 5 times that I can remember.

So, we should use them to help us calculate our stakes, but be aware that the likelihood of them cropping up are fairly remote.

Despite this, I think the stop levels which the relevant firms publish on their sites, are as good a guideline as we need to define our stake calculations, whether we use a stop loss account or not. Let me know if you need help finding the stop rules for any of the firms.

It’s about time we looked at a couple of examples, I reckon. Let’s look at one highly volatile market, and another much less so. Apologies to those of you who prefer other sports to football, but it is the one which dominates the spread betting arena, so we’ll focus on that for now. As I’ve said elsewhere, just drop in a comment if you would like me to work specifically on other sports markets.

Total Goal Minutes is perhaps the most popular high volatility football market. The times that goals are scored in a match are added together to give a final make-up. So, a game might have just one goal, but the TGM’s make-up could be anything between 1-90.

The infamous 9-1 Spurs win over Wigan recently seen a TGM’s outcome of 627, so any sellers in that market would have thanked their lucky stars for a stop loss. The day before that game, Chelsea beat Wolves 4-0 and TGM’s was only 95, while Liverpool and Man City shared 4 goals and TGM’s made up 272, so you can clearly see the volatility here.

The stop in the TGM’s market is 200 or 250 depending on the firm, and the minimum stake can be as little as £0.05, meaning that betting at that level, the most you could lose would be £10 or £12.50.

The Total Goals market is a good example of a less volatile bet, and the stop loss is set here at 5 with both firms offering it. So, if you were to sell a TG market at say 2.0, then any goals after the 7th in a match would be discounted, and the minimum stake on this market can be a little as £0.10, making it impossible at this stake level to lose any more than 50p!

What you need to do therefore, is to base your stake on all markets on the stop loss setting. How much of your bank you should risk on any single bet is open to debate, but I haven’t heard any sensible person ever recommend anything above 5%, and I would go along with that. Personally, I don’t like going above 3%, but if you think 1% is enough, or are happy to go to 5%, I wouldn’t really argue. Never risk any more than 5% of your betting bank.

If your betting bank was say £500, that would mean that on the examples above, you could stake up to 10p on the TGM’s. Sounds a measly stake, but buyers of this market in the Spurs match would still have made close to £50.

In the Total Goals example, with a bank of £500, you would be staking £5 a goal, if your criteria was no more than 5%, but less if you prefer to risk a lower percentage of your bank.

I hope that helps anyone who is unsure of the risks of spread betting, and how to calculate them, and I hope that dispels some of the fears. In essence, it’s like any other trading or gambling that you do - do it sensibly, protecting your bank at all times, and you can have great fun spread betting without worrying about losing your shirt.

The risks are different to fixed-odds or exchanges, but managed properly, they are exactly the same.

Take a look here to see how we did last weekend with our La Liga bookings (not too well), and our Weekend Live recommendations (turned out nice), and make sure you check our suggestions for the weekend.

Click on these links to open spread betting accounts with Sporting IndexExtrabet or Spreadex and claim a total of £600 in free bets.