What are staking strategies?
A staking strategy determines how much money a player wagers on each bet. While the identification of positive expected value determines which bets to place, the staking strategy determines how much capital to risk on each one. Both decisions are essential: even a player with a genuine edge can deplete his bankroll through poor staking, and a well-managed bankroll cannot overcome a negative expected value.
Fixed staking
Fixed staking means wagering the same absolute amount of money on every bet, regardless of the bankroll size, the odd, or the expected value.
For example, a player with a ¤1000 bankroll wagers ¤10 on every bet.
The advantage of fixed staking is simplicity and low variance. Because the wager does not increase as the bankroll grows, the risk of a single losing streak depleting the bankroll is low. However, the growth of the bankroll is linear rather than exponential: the player does not reinvest his profits by increasing his stakes.
The expected bankroll growth after n bets is:
B = B₀ + n · s · e
Where B₀ is the initial bankroll, s is the fixed stake, and e is the expected value per unit wagered. After 500 bets at ¤10 with an expected value of 5%:
B = ¤1000 + 500 · ¤10 · .05 = ¤1000 + ¤250 = ¤1250
Flat percentage staking
Flat percentage staking means wagering a fixed percentage of the current bankroll on every bet. The stake adjusts automatically as the bankroll grows or shrinks.
For example, a player wagers 2% of his bankroll on every bet. If the bankroll is ¤1000, the first bet is ¤20. If the bankroll grows to ¤1100, the next bet is ¤22.
This approach produces geometric (compounding) growth when the expected value is positive. It also naturally reduces the stake during losing streaks, providing a degree of protection against bankruptcy. The bankroll can never reach exactly zero, because each successive wager is a percentage of a diminishing amount.
However, the rate of growth is not optimized. The percentage is the same for all bets, regardless of the expected value or the odd. A bet with 2% expected value and a bet with 10% expected value receive the same fraction of the bankroll, which is suboptimal.
Unit staking
Unit staking defines a base unit as a small percentage of the bankroll, and assigns a different number of units to each bet based on the player's assessment of the expected value or confidence level. A bet with higher expected value receives more units; a bet with lower expected value receives fewer.
For example, the base unit is 1% of the bankroll (¤10 on a ¤1000 bankroll). The player assigns between 1 and 5 units to each bet:
— A bet with marginal positive expected value: 1 unit (¤10)
— A bet with moderate positive expected value: 3 units (¤30)
— A bet with strong positive expected value: 5 units (¤50)
This approach is more flexible than flat percentage staking, as it allows the player to allocate more capital to better opportunities. However, the assignment of units is typically based on the player's subjective judgment rather than a precise formula, introducing potential inconsistency.
Kelly staking
Kelly staking uses the Kelly criterion to determine the optimal wager for each bet based on the expected value and the odd:
k = e / p
Where e is the expected value and p is the prize (decimal odd minus 1). The result k is the fraction of the bankroll to wager.
Kelly staking is the only strategy that maximizes the long-term growth rate of the bankroll, given accurate probability estimates. It automatically adjusts the stake in proportion to both the expected value (larger stakes for higher expected value) and the odd (smaller stakes for higher odds, which carry more variance).
However, full Kelly staking produces high variance and large drawdowns. A player using full Kelly can expect to lose 50% of his bankroll at some point. For this reason, most practitioners use fractional Kelly — typically between 25% and 50% of the full Kelly fraction. This substantially reduces variance while sacrificing only a moderate amount of long-term growth.
Comparison
The following comparison summarizes the key properties of each strategy, assuming the player has positive expected value:
— Fixed staking: linear growth, lowest variance, simplest. Does not adapt to bankroll changes. Risk of over-betting if the bankroll shrinks substantially.
— Flat percentage: geometric growth, moderate variance. Adapts to bankroll changes. Does not differentiate between bets of different expected value.
— Unit staking: geometric growth, moderate variance. Differentiates by expected value, but the differentiation is subjective.
— Kelly staking: maximum geometric growth, highest variance (at full Kelly). Optimally differentiates by expected value and odd. Requires accurate probability estimates.
— Fractional Kelly: slightly reduced geometric growth, substantially reduced variance. The most common choice among professional players.
No staking strategy can turn negative expected value into profit. The foundation of any profitable strategy is the ability to identify bets with positive expected value. The staking strategy then determines how efficiently the player converts that edge into bankroll growth.