Kelly's sports betting strategy: description, calculation formula and examples for beginners
The Kelly Criterion to keep your bank even with a long series of failures. Everyone can learn the calculation formula, but to use it correctly is to use it. In this article, we analyze the Kelly criteria and its main drawback, as well as consider other bank management strategies.
Kelly Criterion in Bets
Kelly Criterion in Bets
The Kelly Criterion is a bank management principle for playing value bets. This strategy allows you to determine the size of bets depending on the bank and previous results.
Determine the amount of the bet according to the Kelly criterion using the formula:
((K x P - 1) / (K - 1)) x R x B, where K is the odds, P is your probability score, B is the size of the pot, and R is the win rate.
If you have played 30 bets out of 100, then R = 0.30. For beginners, Championship recommends using R = 0.25.
After 100 bets, evaluate the passability and use the new R value.
You can also use the online calculator to calculate the Kelly Criterion bet amount.
A value bet or value bet is a bet on an underestimated event, when the probability of a particular outcome is higher than the bookmaker believes.
A value bet if:
K x P > 1, where K is the coefficient, P is your probability estimate.
Value bet example
Let's imagine that in the match "Spartak" - "Rubin" the bookmaker offers odds of 1.70 to win the hosts, and in your opinion, the red-whites have 70% to win.
Assessing the bet:
1.70 x 0.7 = 1.19 >1, that's a value.
Determine the possible profit at a distance using the formula:
N x S x (K x P - 1), where N is the number of bets, P is your probability score, K is the odds, S is the bet amount.
If you make 100 similar bets in the amount of $500, with a correct estimate of the probability, the profit will be $9500: 100 x 500 x (1.70 x 0.70 - 1).
The essence of the Kelly criterion for beginners
By applying the Kelly Criterion, you are not risking the entire size of the pot, but only a small part of it. In the long run, even with a series of failures, you will save some of the money.
For example, your bank is $10,000. Consider the first three bets:
- In the meeting between Zenit and Ural, the bookmakers gave a coefficient of 2.65 for the total goals over 3.5, and you estimated the chance of this outcome at 60%. We check the rate: 2.65 x 0.6 = 1.59, this is value.
Zenit won with a score of 7:1, the bet went in, the payout was 2369 dollars: 894 x 2.65. There are $11,475 in the bank: $10,000 - 894 + 2369.
- In the Akhmat-Dynamo match, the odds for a home win or a draw were 1.60, and you thought that the bet would win with a probability of 70%. We determine that this is a value: 1.60 x 0.7 = 1.12.
"Akhmat" lost with a score of 2:3, the bet lost. $10,901 in the bank: $11,475 - $574.
In the duel between Rostov and CSKA, the bookmakers set the odds of 2.80 for the hosts to win, and you estimated the win of the yellow-blues at 45%. Value bet: 2.80 x 0.45 = 1.26.
Determine the amount of the bet: ((2.80 x 0.45 - 1) / (2.80 - 1)) x 0.25 x 10,901 = 394 dollars.
Rostov won with a score of 3:2, the bet played, you received 1103 dollars: 394 x 2.80. There are 11,610 dollars in the bank: 10,901 - 394 + 1103.
Other Bank Size Management Strategies
In addition to the Kelly criterion in rates, there are several more bank management strategies:
Fractional Kelly criterion
You bet part of the amount calculated by the Kelly criterion. For example, 50%.
Martingale strategy
After each loss, you increase the amount of the next bet or odds so that you make a profit on the first call.
D'Alembert strategy
After each failure, you increase the amount of the next bet by the selected unit, and after winning, decrease by the same amount.
Flat strategy
You bet the same amount regardless of the odds and the size of the pot.
Fixed interest from the bank
You bet the same percentage of the pot. Count the amount before each bet.
The disadvantage of the Kelly criterion in sports betting
The difficulty lies in the fact that you need to correctly estimate the probability of an event. The strategy helps to determine the amount of the bet depending on your score and previous results. With a qualitative analysis of matches, you will increase the chances of profit.
After each failure, you increase the amount of the next bet by the selected unit, and after winning, decrease by the same amount.
Flat strategy
You bet the same amount regardless of the odds and the size of the pot.
Fixed interest from the bank
You bet the same percentage of the pot. Count the amount before each bet.
The disadvantage of the Kelly criterion in sports betting
The difficulty lies in the fact that you need to correctly estimate the probability of an event. The strategy helps to determine the amount of the bet depending on your score and previous results. With a qualitative analysis of matches, you will increase the chances of profit.