What is the Kelly Criterion Betting System?
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The Kelly Criterion betting system is a mathematical formula bettors use to determine their bet sizes. Like most betting strategy formulas, the Kelly criterion betting formula is not without risk. In this article, we will explain how the Kelly betting model works, and provide other information such as key statistics & facts, and tips for using it the right way.
Teodor Todorov, Betting Expert & Writer for SilentBet
I have used the Kelly Criterion betting system for a while. There are downsides to using it, but if you apply it correctly, you can see your profits increase by as much as 35%.
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The Kelly Formula & Gambling
The Kelly formula is suitable for investing, sports betting, and roulette. Essentially, the Kelly formula calculates the odds of winning and losing. Its goal is to help bettors to maximize their profits on winning bets.
The Kelly criterion formula is as follows: f = (bp – q) / b
Each letter of the above formula stands for:
- f – the bet size based on the size of your bankroll.
- b -the bets decimal odds – 1 (One)
- p – the probability of the bet winning
- q – the probability of your bet losing
The Kelly Criterion is a mathematical betting formula used by investors and gamblers to determine the appropriate bet size. Developed in the 1950s by John L. Kelly Jr, the Kelly betting approach considers the odds, the probability of winning, and the expected value of return to determine the ideal bet zie.
Like many betting strategies, the purpose of the Kelly formula is to maximize long-term returns by increasing your bet size when the odds are in your favor and decreasing them when they are not.
The Kelly criterion betting strategy has been studied and applied to a variety of different areas. They include casino games, stock investing, and sports betting.
Key Statistics & Facts:
- When compared to other betting strategies, the Kelly betting system has proven itself to increase returns by as much as 35%.
- Research suggests that using the Kelly multiplier strategy can reduce the odds of ruin by up to 80%.
- A recent study suggested that using the Kelly criterion gambling system can help bettors predict the outcome of a horse race by as much as 70%.
- Using the Kelly criterion betting strategy has allowed professional blackjack players to experience a loss reduction of up to 45%.
How the Kelly Betting Works
Most bettors fail to put much effort into analyzing their bet amounts. They may base their bets on their bankroll, or may simply bet off the cuff. As such, they fail to take advantage of profitable opportunities and typically stake too much of their bankroll.
The Kelly staking plan solves that problem as it helps bettors bet according to the situation at hand. Essentially, your Kelly bet would result in you making an investment equal to your bet odds with the estimated probability of winning and losing.
Speaking of the latter, here is a Kelly criterion example at work:
- The Boston Celtics have +250 odds (3.5 decimal).
- +250 odds is equal to an implied probability of winning of 28.6%.
- If you believe that the Celtic’s win probability is 35%.
- p = 0.35
- q = 0.65
- Formula: (2.5 x 0.35 – 0.65) / 2.5
- Your bet size
- Based on the above, you should wager 9% of your bankroll size.
Tips for Using the Kelly Criterion the Right Way
The success you achieve using the Kelly criterion betting strategy depends largely on your handicapping abilities. That said, if you are unsure if the Kelly criterion is right for you, you can check out our full list of the best strategies for betting. In the meantime, here are some tips for using the Kelly criterion the right way.
- Tip 1: Improve your handicapping skills – If you want to succeed using the Kelly criterion betting strategy, you must have good handicapping skills so that you can determine the probability of winning and losing. Failing to do so will result in your being unsuccessful with your bets. Improving your handicap skills also improves your risk management skills.
- Tip 2: Modify your betting strategy – Considering the aggressive nature of the Kelly Criterion, you may at times want to modify your betting strategy. You can reduce the risk based on the house edge by using the half or quarter Kelly strategy.
- Tip 3: Use a Kelly Criterion calculator – While the mathematical formula behind the Kelly Criterion isn’t complicated, you may want to consider using a Kelly Criterion calculator. Essentially, the Kelly Criterion calculator does the work for you versus you having to determine the risk and bet size yourself.
Teodor Todorov, Betting Expert & Writer for SilentBet
I am aware that the Kelly Criterion can be an intimidating betting strategy. However, for those who use our tips, their success rate can increase tenfold.
Pros & Cons
Like most betting strategies, the Kelly Criterion is a suitable option for those hoping to see an increase in their profits. However, while there are advantages to using this system, there are limitations and risks.
- Advantages of Using the Kelly Rule for Betting
- Unique gambling system that determines bet sizes
- Helps players maximize their profits when applied correctly
- Can substantially increase the size of your bankroll
- Offers a variety of lower-risk alternatives
- Limitations and Risks Using the Kelly Criteria
- Not ideal for those who are bad at handicapping
- Harder to learn than other betting strategies
- Can at times require a much larger percentage of your bankroll
- Not suitable for inexperienced bettors
The Bottom Line: Why Use Kelly Criterion in Online Casinos?
Should you use the Kelly Criterion betting system in an online casino? Yes, but only if you understand the associated risks. Although, that applies to all betting strategies and it is why we have done our best to provide you with as much information as possible about the Kelly Criterion betting strategy. That said, we do recommend you use a Kelly Criterion calculator until you are familiar with how the formula works.
Teodor Todorov, Betting Expert & Writer for SilentBet
I know the Kelly Criterion is not suitable for every bettor. However, for bettors who are willing to apply this strategy to their bets, it can be quite rewarding.
FAQs
Can the Kelly Criterion be applied to any type of betting?
No, it is more successful when applied to roulette, sports betting, and investing.
How do I determine my bankroll when using the Kelly Criterion?
Unfortunately, your bankroll should be an amount you are comfortable risking as there is no formula to determine your bankroll when using the Kelly Criterion.
How does the Kelly Criterion calculate optimal bet size?
The Kelly Criterion calculates the odds of winning and losing to calculate the optimal bet size.
Are there any common mistakes to avoid when using the Kelly Criterion?
Yes, failing to calculate the house edge, overbetting, underbetting, and failing to adapt to changing conditions are the most common mistakes made when using the Kelly Criterion.
How does the Kelly Criterion compare to other betting systems?
Comparatively speaking, the Kelly Criterion is the only betting system that allows bettors to adjust their bets based on how they feel about a specific bet.
Who should use the Kelly Criterion for betting?
One reason you should use the Kelly Criterion for betting is it is an adjustable betting strategy that does not require a large bankroll.
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