Bankroll Management
Bankroll Management
How to manage your capital to avoid going bust.
The #1 reason traders fail is not bad predictions—it's bad money management.
The Kelly Criterion
This is the gold standard formula for how much to bet.
- Goal: Maximize long-term wealth growth while avoiding ruin.
- Logic: If you have a 60% edge, you should bet more than if you have a 51% edge.
- Warning: Full Kelly is volatile. Most pros trade "Half Kelly" or "Quarter Kelly" (betting a smaller fraction of what the formula suggests) to reduce stress.
Diversification
Don't put 100% of your portfolio into one binary event.
- If that one event goes wrong (even if it was 99% likely), you are wiped out.
- Spread your bets across uncorrelated markets (e.g., one Sports bet, one Crypto bet, one Politics bet).
Don't Chase Losses
If you lose $1000, don't immediately make a risky $2000 bet to "win it back". This is "Tilt", and it leads to zero.