The world of online betting is populated by account holders who are every day, searching for the best strategy. If the Kelly Criterion Strategy is not on your list, it is about time you add it. When it comes to betting the most common challenge that players face is, how does one ensure that they place stakes so correctly that wins will be ‘big’ and losses will be ‘small’?
What is the Kelly Criterion Betting Strategy?
We use this strategy in betting, to calculate the highest and lowest probabilities of winning and losing. Although it sounds like all other strategies, it is significantly different and more complex. Why? The Kelly Criterion helps to determine how much you should place a winning bet and increase the value of the returns, as well as the amount you should stake on a game that you are not so sure of winning.
The Kelly Criterion Strategy is used to balance the equation of risk and reward.
Players who have mastered the math behind the Kelly Criterion can say that the strategy has helped them to determine the optimal size of their bets. The advantages of using the Kelly Criterion are evident over time when players realise that the fraction of won bets equals the probability that any bet will be a win.
The Kelly Criterion maximises your advantage and minimises your risk by taking the available value and the size of your bankroll into account.
Kelly Criterion betting in sports
With all the math involved, you could be wondering how it will apply when betting in the world of sports, where there have never been two exact games. So, how can you use the Kelly Criterion to calculate probabilities in the sports industry?
It is extremely difficult to determine the exact probability that a certain sport- bet will win, especially if you are basing your argument on personal opinions.
How to calculate Kelly Criterion
To calculate Kelly Criterion betting strategy, you have to understand, master and practise the formula, which is:
(bw – l) /b = f
‘b’ is the multiple of your money, which you can win from the bet. With decimal odds, the value of ‘b’ is equal to the odds, minus 1.
For instance, a £10 bet at 5.00 gives a return of £50, including the initial amount. Therefore, the total amount of money won is £40 or a multiple or 4 (based on the principal amount).
‘w’ is the probability of the bet winning, meaning that a bet with a 30% chance of going your way has 0.30 probability of winning.
‘l’ is the probability that your bet will lose.(Using the example above and assuming there are no ties) if you have 30% chances to win, it means that there is a 70% chance of losing. Therefore, the probability of losing is 0.70. You can also determine ‘l’ by subtracting ‘w’ from 1.
‘f’ is the solution that provides you with the fraction of your bankroll that should be used to place your desired bet.
If we use the values from our examples, our equation will look like this:
( (4 x 0.30) – 0.70)/4 = 0.125
Based on this example, you should bet 12.5% of your bankroll on your chosen game.
Positive Expected Value in the Kelly Criterion Strategy
When the probability of a bet winning is more than the implied probability of the odds, we say that there is a Positive expected value. For instance, if the odds are two and the implied probability of you winning is 0.50 or 50% but you still believe that the bet has over 50% chances of winning, it means the bet has a positive expected value.
Rules of using Kelly Criterion
It is important to be keen when using the Kelly Criterion in sports betting. It is advisable to only make bets in games with a positive expected value. Value is not constant in sports, with people differing on views and analysis. However, before placing a bet, you should always ensure that the odds are high enough to make up for the risk of losing.
The Kelly Criterion will help you to balance the odds of winning and the risks of losing as you bet on your favourite games. If there is no positive expected value, your formula will return a negative which means it is not a good bet to make.