The Kelly Criterion technique can be applied to various gambling and betting games, including sports betting. Its main purpose is to strike the ideal balance between risk, and return while lowering volatility.
It is the key to maximizing potential betting profits, while limiting the probability of losing all your bankroll while placing sports bets. The Kelly Criterion is important to help you do that, so it’s a worthwhile research tactic.
This betting technique is well-liked by many gamblers. A lot of professional gamblers cling to it.
What Is the Kelly Model?
The Kelly Criterion can be used to calculate the best amount of money to wager on an opportunity. It’s essentially a mathematical calculation. It considers the anticipated return, and the quantity of money available for utilization.
It can determine how much you should stake on any wager you make in sports betting. We’ll go over the formula to determine how much money you should risk about the size of your betting bankroll.
The predicted chance of a wager winning must be included in the formula for it to be useful. This is so that you may ensure that you stake larger amounts when putting bets, with a higher probability of winning, and lower amounts when placing bets with a lower probability of winning. This is the primary goal of the Kelly Criterion as a betting strategy. Read more about Betting Odds and Winning Percentages
The precise likelihood of any sports wager succeeding is unknown, though, because it depends on many distinct variables. There is no way to arrive at a firm, accurate conclusion because determining how likely a wager is to win eventually boils down to a degree of subjective judgment.
At this point, applying the Kelly Criterion becomes more challenging. If you can’t assign probabilities with some level of precision, it won’t work. This isn’t easy to achieve, so many individuals who bet on sports lose money.
How to Use the Criterion?
Each time you place a bet, you must use the following formula to use the Kelly Criterion as a betting strategy:
(bp – q) / b = f
By itself, this formula doesn’t reveal much. You have to comprehend what each component stands for, which we will describe below:
- The stake multiplier you can win with the bet is “b”. When using decimal odds, b equals the odds less than 1. For instance, a $10 betting at 3.00 gives a total return of $30, which includes the initial bet, so the prize for this example is $20, and the multiplier is 3 – 1 = 2.
- “p” denotes the likelihood that the suggested wager will succeed. For instance, the probability of winning a bet with a 40% likelihood of success is 0.40. You can calculate implied probability using a tool like this.
- The likelihood that the suggested wager will fail is expressed as “q”. It’s easy to determine “q” by subtracting one from “p”. Thus, the likelihood it will fail is 0.60.
- The answer to the calculation, “f”, gives you the recommended portion of your bankroll to stake on the suggested wager.
Based on the example in the description above, let’s see how the formula works. We’ll state that the suggested wager has odds of 3.00, a 0.40 winning probability, and a 0.60 losing probability.
( (2 x 0.40) – 0.60 ) / 2 = 0.1
According to this method, you ought to risk 0.1 (or 10%) of your bankroll on the suggested bet. Combine this strategy with the best odds, click here to read more.
Kelly Criterion and Expected Value
Remember that the Kelly Criterion formula only truly applies to bets with positive expected values. This is completely accurate, because strictly speaking, you should never place a wager unless there is a positive expected value.
Value in sports betting is arbitrary, because everyone’s perception of the likelihood that a given wager will succeed will differ. The key is that you shouldn’t bet, if the odds aren’t good enough to offset the possibility of a loss. A great bookmaker to try this strategy is Betway.
Disadvantages of Using the Kelly Criterion
The Kelly Criterion has two primary drawbacks.
The first one, implies that the Kelly Criterion only really has value, when you can accurately calculate the probabilities of any proposed bets. The idea falls apart if you can’t execute that at least passably well. You’ll wind up placing the incorrect bets, which will either cause you to lose your bankroll too quickly or prevent it from growing.
The second drawback of the tactic is that it can be viewed as excessively aggressive. In the preceding illustration, the method recommended staking 10% of your money. In any case, this is a pretty high proportion of risk. Rarely, if ever, should you put more than 5% of your bankroll toward a single bet, and many gamblers never go higher than 2%.
However, you can get around this drawback by simply being more circumspect, and lowering your bets below what the formula suggests. Many gamblers place fixed bets of the indicated stake using a technique known as the fractional Kelly approach. Regardless of the fraction, 50% is usually used.