## The Allocation Decision
How much of your total bankroll should each strategy receive? The answer depends on:
1. The strategy's validated edge (higher edge → more allocation)
2. The strategy's variance (higher variance → less allocation)
3. The strategy's correlation with other strategies (lower correlation → more allocation OK)
## The Sharpe Ratio Framework
The Sharpe ratio (EV / standard deviation) measures risk-adjusted return. For betting:
Strategy Sharpe = Expected ROI / Standard deviation of ROI
Allocate proportionally to Sharpe ratio across strategies. A strategy with Sharpe 2.0 receives twice the allocation of a strategy with Sharpe 1.0.
This is the institutional asset allocation framework applied to betting.
## Simplified Allocation Rules
For bettors without full Sharpe ratio calculations:
**Stage 1 — Entry allocation:** New strategies receive 15% of total bankroll until 300 bets validate edge.
**Stage 2 — Proven allocation:** Validated strategies with positive CLV receive 20–35% based on qualitative edge assessment.
**Stage 3 — Core allocation:** Strategies with 1,000+ bets of positive CLV become core allocations (up to 50%).
Maximum in any single strategy: 60% (concentration risk limit).
## The Rebalancing Rule
Review allocations quarterly. Strategies that have produced consistently better results than initial estimates: increase allocation (up to their category maximum). Strategies with deteriorating CLV: reduce allocation or remove.
## Cash Buffer
Always maintain 10–15% of total bankroll as an unallocated cash buffer. This:
- Provides liquidity for rapid deployment on unexpected high-EV opportunities
- Acts as the operational reserve for account float management
- Prevents being "fully deployed" with no response capacity
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