What is Kelly Criterion Betting? Find an Example and Grab an Edge!
Before we start to talk about Kelly criterion betting it is important that you are aware that there are some scientific-sounding formulas out there which will promise to revolutionise your betting results, but which are nothing more than pie in the sky.
Just because something has a convincing name doesn’t mean that it is any good, but the problem is that rogue system sellers will get hold of it, add a highly convincing sales page from which they sell the system along with a few other shady people who will promote the product, and before you know it you are made to believe that it is the best thing since sliced bread and you will never have to work another day in your life.
The Kelly criterion betting method is NOT one of these systems because it is available without charge from a quick google search, and does work, but some punters might use it and then start to look for other so-called systems because of the success that they have had with this one.
The Kelly formula is basically a money management system which calculates the kind of value stake you should place on a selection to bet on.
Most punters don’t give any thought to a staking plan or money management system, and this is the main difference between a casual punter and those who bet for a living.
If you are serious about making money from your betting activities, you should run the whole operation in exactly the same way that you would run a business so it would be fair to say that any decent staking plan or money management system is better than using none at all.
Ok, let’s get down to the finer details of the Kelly criterion investing so that you know exactly how it works and how to use it.
The Kelly Formula Calculation
The formula for the Kelly Criterion is as follows:
(BP – Q) /B
Now, if mathematics wasn’t your strong point at school, you are probably looking at the formula, and your eyes are glazing over as it just looks to be too complicated but hold on for one minute because it is not as complicated as it first looks.
- B stands for the Decimal odds
- P stands for the probability of success
- Q stands for the probability of failure
As you can see from this formula, you do need to have a knowledge about the event which you are about to place a bet on because you need to come up with a figure for the probability of success and the probability of failure but when you do, the idea of the Kelly Criterion is to be able to determine the size of the bet that you are going to make depending on the above calculation.
If you are looking for a Kelly criterion example, it is simply a case of substituting the B, P and Q from above and replacing them with the odds from a bet that you have in mind.
Kelly Criterion Portfolio Management
When you become familiar with Kelly criterion investing you will come across people talking about the Kelly criterion portfolio management, and this is basically where you are using the Kelly formula on separate banks for any different betting system that you are using.
We have spoken before about the importance of having separate banks in places for every betting system or tipster that you are using, and all that this Kelly formula does is to confirm if there is value in the bet that you are going to make and if so, how much you should stake.
The Importance of Sticking With It
As with any betting system or money management plan, it is especially important that once you start using it, you stick with it.
The real benefits of the Kelly formula can be seen when used over the long term as opposed to just over the course of a few weeks.
The reason for this is because the main theme behind the Kelly criterion betting system is value and as any successful punter will tell you, finding value in a bet is one of the most important factors as to whether you will see a profit over the long term or not.
It is no good at all if you start to use Kelly criterion for football betting and giving up on it over a few days because the results are not what you are expecting.
If you are struggling with the very essence of Kelly criterion betting which is value, the easiest way to describe it to you would be to give an example of betting on the result of the tossing of a coin, heads or tails.
As you will be aware, there is a 50/50 chance of the coin landing on heads or tails but let’s say that someone offered you odds of 5/4 on the coin land on heads.
If you accepted this bet, you would have a value bet because you would be getting odds of 5/4 on an event which should be priced at evens.
The Kelly formula will help you identify opportunities such as this and then help you calculate what percentage of your bank should be used in order to maximise the betting opportunity and over the long term, to see your bank grow.
Should You Get Involved with Kelly Criterion in Sports Betting
It is obviously up to you if you use Kelly criterion betting because admittedly, it can be a little complicated if you are using it for the first time, but what is important is that you seriously consider using some kind of staking plan in tandem with a betting bank.
This will mean the difference between making a success of your betting over the long term because you will be able to take advantage of any winning runs whilst limiting the losses should your bets starts to go against you.