Kelly Criterion: How it works and how to use it in sports betting

Bring statistical probability to sports betting with the Kelly Criterion. This powerful mathematical formula claims to ensure long-term bankroll growth. In essence, it goes beyond betting on the winning side since it helps you determine the optimal amount to wager on each bet while considering factors like your bankroll and the match odds.

This guide from Sportsbet.io will take you to the ins and outs of the Kelly Criterion. We’ll break down the formula itself, explain its advantages, and answer the crucial question: Why should you use it? Here is everything you need to know to maximise your winning potential.

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What is the Kelly Criterion?

Kelly Criterion is a mathematical formula developed by Dr John L. Kelly Jr, a Texan-born physicist and World War II veteran. Dr Kelly’s formula is designed to guide sports betting decisions. Instead of deciding which outcome to bet on, it determines how much you should stake given the odds and your bankroll.

When used correctly, the Kelly Criterion calculator can help to ensure your bankroll’s longevity and growth. You can eventually earn a potential profit even if you suffer from a losing streak or a bad wager. By following the Kelly Criterion sports betting system, you can see your results improve gradually.

Explanation of Kelly’s Criteria

You can start using the Kelly Criterion sports betting system once you understand how the formula works. Here’s a walkthrough of how it works to help you get started:

In theory: The Kelly Criterion formula

The Kelly Criterion focuses on determining the fraction of your bankroll to use as a bet (f*). To do that, you need to make a calculation using the following formula:

• f* = (bp-q) / b

The data for the rest of the equation are the following:

• b = the odds of the bet minus 1 (must be decimal).

• b = decimal odds - 1

• p = the implied probability of winning (if in percentage, divide the number by 100).

• p = % of winning / 100

• q = the implied probability of losing or the difference between 1 and ‘p’.

• q = 1 - p

It’s important to get all of these odds before you place bets. It’s usually easier to use the Kelly Criterion formula on a pre-match bet when the odds tend to be more stable compared to live betting.

To calculate p and q, you need to get the implied probability for every bet you want to make. Calculating requires getting the decimal odds of your predictions, and then using this formula:

• implied probability = 100 * (1 / decimal odds)

After calculating the f*, you can interpret the result as a decimal value. Multiply it by 100 and convert it to a percentage. This represents the portion of your bankroll you should wager on that particular bet.

A negative f* indicates you should not place a bet

In Kelly Criterion betting, the f* is the fraction of your wager to bet on the outcome. For example, if f* is 0.65, you should stake 0.65% of your bankroll. A bankroll with 100 (USDT) will let you stake 0.65 USDT on that wager. It’s possible to have a negative result using this equation, indicating that you shouldn’t bet on that outcome at all.

Implied probability for two outcomes is not always 100%

The implied probability in the Kelly Criterion betting method is written in percentage (%). However, that does not mean that the implied probability of two outcomes will always be 100%. There will be excess representing the house’s expected profit if you place a bet on both outcomes. It’s advised that you bet on one outcome per match to maximise potential results and minimise the bookmaker’s edge.

In practice: Kelly Criterion explained

To summarise, you first need to get the odds of the bet you’re going to make. The Kelly formula sports betting strategy can be applied to all betting markets but it’s popular for bets with just two or three outcomes. Match winner and over/under bets are the most popular examples.

For this Kelly Criterion example, here’s a baseball game between the Los Angeles Dodgers and San Francisco Giants. Sportsbet.io offers the following odds for that match in futures betting:

• Los Angeles Dodgers win = 1.53

• San Francisco Giants = 2.52

How to use Kelly’s Criteria for sports betting for the Los Angeles Dodgers win

To apply the Kelly Criterion to bet on the Dodgers’ win, here’s how to use the formula:

• Get b = 1.53 - 1

• b = 0.53

• Get implied probability = 100 * (1 / 1.53)

• implied probability = 65%

• Get p = 65% / 100

• p = 0.65

• Get q = 1 - 0.65

• q = 0.35

• Get f* = [(0.53 x 0.65) - 0.35] / 0.53

• f* = (0.3445 - 0.35) / 0.53

• f* = -0.0104 or -1.04% of your bankroll

The outcome is a negative number which means that the Kelly formula refrains you from betting on the Los Angeles Dodgers. They are the favourite of the event with a high chance of winning but the payout won’t help your bankroll’s longer-term growth.

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How to use Kelly’s Criteria for sports betting for the San Francisco Giants win

Here’s how to apply the formula to a bet on the Giants winning against the Dodgers:

• Get b = 2.52 - 1

• b = 1.52

• Get implied probability = 100 * (1 / 1.53)

• implied probability = 40%

• Get p = 40% / 100

• p = 0.40%

• Get q = 1 - 0.40

• q = 0.60

• Get f* = [(1.52 x 0.40) - 0.60] / 1.52

• f* = (0.608 - 0.6) / 1.52

• f* = 0.0053 or 0.53% of your bankroll

Using the Kelly Criterion usage method is just 0.53 USDT if your total bankroll is 100 USDT. Although it may seem low, remember that the bet size scales with your bankroll. 0.53% can be big if you have a larger bankroll. The same rate applies to other currencies, as well, which can be smaller in value like Dogecoin (DOGE) and Ripple (XRP).

The advantages of Kelly’s Criteria in sports betting

The Kelly betting system is a helpful strategy for punters who want a consistent betting pattern as they monitor their betting budget.

A probabilistic approach is more reliable than a whim

The Kelly Criterion method is highly valued for its reliance on probability rather than just win or lose streaks, as seen in methods like the Martingale and Labouchere betting systems. This means that the formula is more flexible and applicable to all kinds of bets regardless of the odds and sport. It also doesn’t leave room for the gambler to let their whim take over their decision-making.

Avoids over-betting and under-betting

The Kelly system betting is designed to dictate your ante per round. It gives you an exact betting size to follow for every market in terms of how much is safe to spend. By following this calculated approach, you avoid the risk of over-betting and under-betting, ensuring statistically safe wagers that contribute to favourable bankroll growth.

Allows for adaptability with bankroll changes

Remember that the Kelly Criterion calculation results determine how much of your bankroll should be placed as a wager on a sports prediction. That means the size of your bankroll also directly affects how much you are staking. This is beneficial for all types of gamblers, from high rollers to those with tighter budgets, as the formula helps you bet the right amount.

Finds the balance between risk and reward

Dr. Kelly made sports betting a much more fun game for everyone upon introducing this method. He is credited for the Kelly Criterion formula as the most accurate equation for balancing risk and reward. The fraction of your bankroll that the formula tells you to stake is fixed. Follow it with no deviation and you’ll see the positive results that the Kelly Criterion promises in the long term.

On top of that, the Kelly multiplier can also become negative which means you should avoid betting on a certain prediction. This helps you steer clear of unprofitable risks so you can reserve your bets for more promising outcomes.

Promotes performance tracking in sports betting

The Kelly Criterion is not an instant method that simplifies sports betting. Instead, it encourages you to do a bit of research even with the simple act of calculating the probability of winning. This already does so much to give you an idea of your chances in a match.

Always make every bet a conscious decision, not a whim. Take the time to study the odds and probabilities then weigh your options. Let the Kelly Criterion show you if a bet is worth placing a stake in by helping you understand all the statistical data around it.

Level up your bets at Sportsbet.io with the Kelly Criterion

Now that you’re well-versed in the Kelly Criterion and its benefits, it’s time to put your knowledge into practice. Fuel your passion by placing wagers on your favourite sports and teams at Sportsbet.io – the premier destination for crypto sports betting. With various domestic and international tournaments to choose from, you can apply this formula to maximise your Kelly betting strategy.

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DISCLAIMER

The information provided by the blog above on Sportsbet.io is for general information purposes only and does not constitute financial advice. All information on the Site is provided in good faith, however, we make no representation, warranty, or guarantee of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, or completeness of any information or betting tips on the Site.