What is the Kelly criterion in betting

What is the Kelly criterion in betting

The Kelly Criterion is a combined sports betting strategy that is widely popular with many players. Its author is American John Larry Kelly, who created it in 1956. This is an improved Value Betting strategy, which involves not only looking for inflated odds, but also determining the appropriate bet amount.

The Kelly criterion successfully applies two components at once: game (the bettor determines the probability of the outcome and compares it with the bookmaker’s odds, revealing values) and financial (using a special formula, the player calculates the amount of the bet on a particular outcome).

Kelly criterion in rates

Putting the strategy into practice

First, you need to find the value rate. This is done as follows:

  1. The player analyzes in detail a suitable match and calculates the probability of passing different outcomes;
  2. After that, he compares his results with the bookmaker’s offer in order to understand how profitable the bet is.

Now let’s look at this procedure with a specific example. The player analyzed the match between Valencia and Real, according to his forecast, the probability of a victory for Real is 65%. The bookmaker gives a coefficient of 1.7 on P2. To find out the probability, you need to divide one by this coefficient – it turned out to be 58%. This means that this bet can be called value and can be used in Kelly’s strategy.

Next, the formula is applied, according to which the bet amount is calculated: R = (K × V – 1) / (K – 1) × B, where:

  • R – the size of the bet;
  • K – outcome rate;
  • V – the probability of passage;
  • B – the size of the bank.

Let’s imagine that our bank is equal to 10,000 rubles, which means that the following should be bet: (1.7 × 0.65 – 1) / (1.7 – 1) × 10,000 = 0.105 / 0.7 × 10,000 = 1,500 rubles.

As you can see, the bet amount can be quickly and easily calculated using an ordinary calculator. It is much more difficult to correctly analyze the match and find a valuable outcome.

Varieties of Kelly’s strategy

This method of play has 3 variations, each of which is suitable for a specific type of player:

  1. Full – this is a classic application of the strategy, when the player bets exactly the amount that the formula has derived;
  2. Partial – this is a safer, but less profitable option, where the player divides the received amount in half;
  3. Constant – suitable only for experienced players who play based on the initial size of the pot, without changing it in the formula until a certain moment, regardless of wins or losses.

The main features of the strategy

The Kelly criterion strategy game has some features that bettors should know about in advance:

  1. You should not play this strategy with a small bank, because the amount obtained by the formula may be less than the minimum allowable;
  2. It is not easy to independently calculate the probability of passing certain outcomes, especially for beginners, because they will have to compete with experienced bookmaker analysts;
  3. If the bookmaker changes the odds, the calculation formula will allow you to adjust the bet amount.

Advantages and disadvantages of the Kelly criterion

Like any strategy, the Kelly criterion has strengths and weaknesses.

Main pluses:

  • If you correctly analyze the probability of passage, you can make a good profit;
  • Suitable for playing at a distance;
  • It can increase the bank several times in a fairly short period of time.

The main cons:

  • If the probability is incorrectly determined, you can quickly lose the entire pot;
  • Not suitable for inexperienced players;
  • It is not always worth playing for the full amount indicated by the formula.

As a conclusion, I would like to say that the Kelly criterion is a good strategy, but it has one big “but”: the player must accurately determine the probability of the passage of events, otherwise he will quickly go broke. This is the reason for most of the dissatisfied reviews, which are mainly written by inexperienced bettors who have lost because of their mistakes, but they blame the strategy for everything. It is important not to forget that any tactics can lead to the loss of the bank, so it is better not to bet without proper preparation. Remember that you are primarily responsible for your result, and not the authors of various game techniques.

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