Kelly Criterion is a system for budget management in sports betting. The system uses special formulas for determination of the optimal bet amount that you place for your chosen selection.
Equation is as follows:
d = decimal odd minus 1
s = possibility for success (between 0 and 1)
f = possibility for not having success (it will be 1 minus “possibility for success”)
Bet = ((d x s) – f) / d
This formula will probably sound to you too difficult. But you will soon find out that it isn’t that hard at all. You only need to use it several times. Here is one example for Kelly Criterion system in action:
You have budget (this is the amount of money you have in the bookie) of 500 EUR. You have found a football match that has an odd for host win of 2.00 and you believe that the possibility for success of this bet is 55%. The first thing you have to do is to fill the three variable quantities. “d” in this example would be 1.00 (the decimal odd 2.00 minus 1), “s” would be 0.55 (which is equal to the possibility of 55% for success) and “f” would be 0.45 (which is equal to 45% of possibility for not having success).
Now, let’s fill the formula:
Bet = ((1,00 х 0,55) – 0,45) / 1,00
Bet = (0,55 – 0,45) / 1
Bet = 0,1 / 1
Bet = 0,10
The final result represents the share of your total budget amount in your bookie’s account you need to bet on this match. If you’ve got budget of 500 EUR, then, your bet would be 50 EUR (0.1 x 500 EUR).
The danger behind this system
The first and the most dangerous tricky thing about Kelly Criterion system is the necessity to be very precise when determining the possibility for success of the bet – pointing out a random number in % for possibility just won’t work. And this is probably the hardest thing in betting sphere at all. In the example from above, if the punter has made a mistake and incorrectly determined, while the possibility for a host win is actually 65% (instead of the real chance of 55% ), Kelly Criterion would have advised him to place a bet of 150 EUR. So if you want to use this system, you need to be quite certain in your calculations.
The second tricky thing about Kelly Criterion betting system is that sometimes, the recommended bet might be a too big share of your budget even if you have correctly determined the % for the success possibility. The example from above draws as a result a bet that is 10% of your budget, which is a quite aggressive approach in comparison to other similar systems for budget management. According to this side betting systems, though, the risk can be reduced. Many punters use the so-called half-Kelly or quarter-Kelly system. In other words, they bet only half or a quarter of the amount that is shown at the end of the calculation. Thus, you can make the system less risky.
Even though not a danger, but yet the fact the system is applied for not more than a single bet at the same time, can be a problem, though. It is because after each next new bet you will have a new budget amount. What to do, for example, on in Saturday afternoon, when there are several interesting matches from the English Premium League and the rest of European national leagues? Maybe, you will find eight matches with a good possibility for success and after making each single calculation, the system will show you that you need to bet totally 112% of your budget, which, as you understand, is quite impossible!
Despite all, if you have the “perfect” information for the possibility for success, Kelly Criterion is by all means the best option you’ve got as it leads you to the most optimal profits. Unfortunately, this “perfect” information is difficult to be found.
If you decide to use the system, we recommend you to start with half-Kelly or quarter-Kelly in order to minimize the risk till you get to know Kelly Criterion in general.