Kelly Criterion Betting System Explained: A Mathmatical Advantage?

The Kelly Criterion Betting System is one of the most talked about systems in the gambling world, but does it work?

The general feeling is that it is an effective strategy. The thing about betting strategy however is everyone has a different style of gambling, and some people have a lower risk appetite than others.

A commonly held opinion is that the Kelly Criterion Betting System, when used on sports betting, reduces the chances of a losing streak and allows for maximum profits. It might sound too good to be true however, in this article, we’re going to look at the pros and cons of the Kelly Criterion Betting System and see if it is a mathematical advantage or not.

What Is The Kelly Criterion Betting System?

In a nutshell, the Kelly Criterion Betting System tells you how much you should stake on each bet. It applies to both back betting and lay betting. Each stake you place is based on your bankroll and the price of the selection. The idea behind it is that you never risk more than you should on one bet while aiming for the best possible return for your bankroll.

A basic explanation of the system would be that the lower the price, the more you bet. The bigger the price, the less you bet.

What the Kelly Criterion Betting System relies on is your pricing. You need to be really good at finding value, and correctly pricing markets. Without that skill, it’s unlikely that the system will work for you.

The Kelly Criterion Betting System uses a formula. That formula is:

f* = bp-q/b 

That all sounds and reads like gibberish, especially when you don’t know what it means.

Let’s break it down:

  • f* is going to be the answer, even though it comes first in the formula. It is the amount of your bankroll that you are going to stake.
  • b is decimal of the bet.
  • p is the probability you give to the bet winning.
  • q is the probability of a loss – so basically the opposition percentage of the win. If you priced something at 2.0 (evens) then both numbers would be 50% for example.

Like all gambling strategies, you have to have an edge for it to be successful. The edge here is your pricing.

Using The Kelly Criterion Betting System

It’s a simple strategy to use, but it does require good maths. It’s a good system to use in the sense that it tells you the exact amount to bet based on your bankroll, so there’s no danger of overstaking. That’s why the Kelly Criterion Betting System is so well-regarded for sports betting.

The main advantages of using the system are:

  • Using the correct stake, based on the bankroll
  • It is regarded as the “best” staking plan for low odds
  • It protects gamblers from taking on too much risk
  • It makes you fully analyse your pricing

There are some negatives to using the system too…

The main ones are pretty obvious:

  1. You have to be talented at creating your prices. If you are not pricing the market correctly, and getting value, the system won’t work and you’ll likely be over-staking on every bet
  2. It’s regarded as the best staking plan for low odds, but if you hit a bad run on low odds you can lose a lot of money using the Kelly Criterion Betting System because you are always going to place big bets using the system

The system can be tricky to use with the maths. It is recommended that you actually use a Kelly Criterion betting system calculator. Another good bit of advice when using the system is to take out your profits – because the system adjusts the stakes based on your bankroll, as your bankroll grows so will your bets. You don’t want to lose all your profits when you hit a poor run – which happens to all gamblers at some stage. The most important factor when using any system is to avoid being emotional – you have to let the system make the decisions and stick to them.

It’s good to test the Kelly Criterion Betting System on paper before you put it into real money use. It relies heavily on you correctly assessing the percentage chance of winning and translating that into odds. While the system is regarded as a disciplined betting strategy as noted above if your odds are off, the whole system fails. There is also the “Fractional Kelly System” whereby you might reduce the stakes. For example, if the system told you to stake 10% of your bankroll you could half or quarter that – but you’d have to do that for every bet, not just one or two. It just reduces the risk to your bankroll.

Related: Matched Betting Strategy – Bigger Results With Lower Effort

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