A mathematical formula that calculates the optimal fraction of your bankroll to stake on a bet, maximising long-term growth given your estimated edge.
Developed by John L. Kelly Jr. in 1956, the Kelly Criterion is a formula that determines what fraction of your bankroll to stake on a bet to maximise long-term bankroll growth. The formula: Kelly % = (b × p − q) ÷ b — where b = decimal odds − 1, p = estimated win probability, q = 1 − p.
A positive Kelly % means bet; a negative Kelly % means do not bet — there is no mathematical edge. Full Kelly staking grows your bankroll at the maximum possible rate given your true edge, but produces high variance.
Most professional bettors use half-Kelly (50% of the recommended stake) to reduce variance. Fractional Kelly cuts bankroll swings significantly while sacrificing only a small amount of expected growth. It also provides a safety buffer if your probability estimates are slightly off.
Kelly should only be used when your probability estimates are reliable and systematic. Using Kelly with intuition-based edge estimates typically results in over-staking and bankroll damage.
Value Betting
Betting at odds that are higher than the true probability of the outcome — finding bets where the bookmaker has underestimated the chances of an event.
Expected Value (EV)
The average outcome of a bet over a large number of repetitions — positive EV means the bet profits long-term; negative EV means it loses.
Implied Probability
The probability of an outcome embedded in bookmaker odds — calculated by dividing 1 by the decimal odds.
Bankroll Management
The practice of controlling bet sizing relative to your total available funds to ensure long-term survivability and sustainable profit.
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