Understanding Variance in Betting and What It Means for Your Results -

When it comes to sports betting, a term you’ll often hear is “variance.” But what does it actually mean, and why is it important for bettors to understand?

Variance plays a key role in shaping betting outcomes, influencing how your bets perform in both the short and long term. By grasping this concept, you can better manage your bankroll and make smarter betting decisions, steering clear of the emotional rollercoaster that variance often brings. There are so many talented sports bettors that eventually lose their entire bankroll due to this lack of understanding.

Don’t let that be you!

What Is Variance in Betting?

At its core, variance refers to the natural fluctuations in betting outcomes due to chance. Even when you make well-researched bets with positive expected value (EV), outcomes can swing in unexpected ways. This happens because no bet is ever a guaranteed win – just see the image below…

Think of variance as the ups and downs that result from the randomness that is natural in sports betting. You might hit a lucky streak where everything seems to land in your favour, or you could experience a rough patch where results don’t reflect the quality of your picks. Over time, however, with enough bets placed, outcomes tend to align more closely with the expected probabilities.

“This is why even the best sports bettors and betting tipsters experience losing periods in the short term. Long term however if they are consistently beating the closing odds (accurate representation of true probability) they will profit in the long run.”

How Variance Affects Betting Outcomes…

Variance is the reason you might win big one week and lose just as heavily the next, even if your betting strategy hasn’t changed at all.

Here is how it can impact betting results in both the short term and long term:

Short-Term Impact

Winning Streaks: Sometimes, you’ll feel like you can do no wrong. Perhaps you’ve correctly predicted a series of underdog wins or hit a few big odds accumulator bets. These hot streaks are exciting, but they might inflate your confidence and make you start staking larger amounts than you should be.
Losing Streaks: On the flip side, there are times when nothing seems to go your way. Perhaps you are placing good bets that are consistently beating the closing odds but you have lost 5 in a row and your confidence is affected.

Long-Term Impact

While short-term winning and losing streaks are influenced by variance, long-term results reflect the true quality of your betting approach. If your bets are consistently based on sound strategies that identify value, you can expect profits to outweigh losses over hundreds or even sometimes thousands of bets. This is why professional bettors emphasize focusing on long-term performance rather than short-term outcomes. It is also why many focus on beating the closing odds or Betfair SP.

The Importance of Understanding Variance

Failing to recognize the role of variance can lead to unrealistic expectations and poor decision-making. Here are some key reasons why understanding variance is essential:

Avoiding Emotional Reactions: When you’re unaware of variance, a losing streak might lead you to panic, while a winning streak could tempt you to bet more recklessly. Understanding that these swings are normal within betting should help you keep a more consistent approach.
Bankroll Management: Variance should shape how you manage your betting bankroll. Overestimating your success or underestimating potential losses can leave you vulnerable to going broke during a downswing.
Evaluating Success: Without considering variance, you might mistakenly judge your strategy as a failure after a series of losses or overestimate its effectiveness after a good streak of results. It’s crucial to evaluate your betting record over a large sample size, not just a handful of bets.

Examples of Variance in Action

To illustrate how variance works, let’s consider a coin toss:

Imagine you’re betting on coin flips, with “heads” set to win you £1 and “tails” costing you £1. Over 10 flips, variance might lead to a streak where heads come up eight times and tails only twice, leaving you with an impressive £6 profit. But over 1,000 flips, the results are more likely to even out, with roughly 500 heads and 500 tails leaving you close to breaking even.

Now, apply this to sports betting. Even if your bets have a small edge (say a 55% likelihood of winning), you could still lose several in a row. Similarly, you might see a string of wins purely by chance. This is why successful bettors focus on the long-term edge rather than being swayed by short-term results.

Tips for Managing Variance in Betting:

Here are some practical ways to manage variance and improve your betting experience:

Use a Proper Bankroll Management Plan: Determine the size of your betting bankroll and allocate a fixed percentage for each wager. A common rule is to bet 1-2% per bet to protect yourself from massive losses during losing streaks.
Focus on Long-Term Results: Track your results over hundreds of bets, not just a few. This larger sample size will give you a more accurate picture of whether your betting strategy is working.
Avoid Chasing Losses: When a losing streak hits, resist the urge to increase your stake to “win it back.” This approach can spiral into larger losses if the streak continues.
Stay Emotionally Disciplined: Understand that luck plays a role in betting, and you can’t control everything. Evaluate your picks based on their value, not just their short-term results.
Track Closing Odds and Betfair SP: If your losses consistently exceed your expectations over time, it might not just be bad luck. Track the closing odds/Betfair SP of selections that you bet on, this is a good way of determining if a bet was good or bad, despite the result.
Set Realistic Expectations: Even the best bettors experience variance. Instead of expecting constant wins, aim for sustained profits over the long run.

My Advice on Variance:

Variance is an inevitable part of sports betting, and understanding it is crucial if you want to understand the highs and lows that will happen. While short-term results might leave you cheering or frustrated, it’s the long-term edge that truly matters.

By keeping variance in perspective, practicing disciplined bankroll management, and focusing on long-term results, you’ll be better equipped to handle both the unpredictable swings and the steady pursuit of betting success.

Remember, in betting, patience, analysis and consistency are your best allies.