I mentioned about the reverse Kelly concept in a recent webinar that I held and there has been a lot of interest in going into more detail on it. I have to say straight up that this wasn’t my invention. I came across the concept a while ago from an American author, David Schwarz (you may have heard me mention him before as I have gained many good ideas from him), and I have played and investigated with it for many years and it holds true and is very powerful.
The theory is based around your advantage and ROI. Using a percentage of your betting bank on every bet will automatically lower these figures and every bettor wants to raise these numbers not lower them!
Take a minute and think about what you are doing when you bet a Kelly or any percentage of your bankroll. You are placing high stakes on the losing bets and lower stakes on the winning bets.
For example you have a £100 bankroll and you bet £10 on the first bet and win £150 and then you bet £15 and lose and then £14 and lose and then £12 and win. You have placed a smaller bet on the winner and bigger bets on the losers.
This scenario means that you can come out as a loser even if you would have made a profit flat betting. What all this adds up to is that to bet a percentage of your bankroll you need to have a greater advantage to profit than if you were flat betting.
Okay so now for the theory. It is really a very simple principle. If it is decreasing our advantage when we follow a Kelly bet or a percentage of the bank bet then if we play the opposite of it, it should increase our advantage.
Think about that for a little bit and let it sink in.
Now unfortunately when I started writing this article I had all sorts of ideas that I wanted to demonstrate but then I realized I couldn’t because this is published information and if I explain much more then I am going to be breaking the copyright law. Sucks I know.
However if there is some serious interest in this money management method then I can get in touch with Dave and see if I can arrange to get the method printed up over here. If you would like to see this made available in the UK then just post a comment below and if we get enough then I shall see what I can do.