--- description: Kelly's Criterion System Explained ✅ Complete Kelly's Criterion Betting Guide ➤ How the System works ➤ Pros & Cons ➕ Tips to Win title: Kelly Criterion Betting - Is it a Reliable Sports Betting Strategy? image: https://cdn.oddspedia.bg/media/en/1x1/guides/betting/strategies-systems/kelly-criterion-explained.jpg --- * [ Home](/) * [Betting ](/betting) * [Strategies & Systems ](/betting/strategies-systems) * Kelly Criterion Betting Explained: System to Calculate Optimal Bet Size ![Kelly Criterion Betting Explained: System to Calculate Optimal Bet Size Cover](https://flyimg.oddspedia.com/upload/w_1270,q_75/https://cdn.oddspedia.com/images/betting/2021/10/Kelly-Formel.jpg) 23 Feb 2024 # Kelly Criterion Betting Explained: System to Calculate Optimal Bet Size [by Oddspedia Experts ](/experts) **Reading time**4 min Listen Listen \-07:17 Gambling in any form, whether in the stock market, roulette or sports, must begin with a bet. The central problem for investors and gamblers is to find a risk-adjusted return and favourable expectation bets. This article outlines **how the Kelly Criterion works,** and it explores its use in determining the fraction of capital to wager in a gamble. * [![Facebook Icon](/placeholder.svg)](https://www.facebook.com/oddspediaglobal) * [![X Icon](/placeholder.svg)](https://x.com/oddspedia) * [![Instagram Icon](/placeholder.svg)](https://www.instagram.com/oddspediaglobal) * [![Telegram Icon](/placeholder.svg)](https://t.me/oddspedia) Do You Find This Topic Interesting? Table of contents: 1. [What is Kelly's Formula](#what-is-kellys-formula) 2. [How to Use Kelly's Criterion](#how-to-use-kellys-criterion) 3. [Kelly Criterion Example in Sports Betting](#kelly-criterion-example-in-sports-betting) 4. [Conclusion](#conclusion) 5. [Kelly Criterion Betting System FAQ](#kelly-criterion-betting-system-faq) ## What is Kelly's Formula In probability theory, the Kelly Criterion, also known as the scientific gambling method or the Kelly formula, Kelly strategy, or Kelly bet, is a mathematical formula for sizing bets or investments that lead to higher wealth compared to any other betting strategy in the long run. It is one of the few [betting strategies](https://oddspedia.com/betting/strategies-systems) with a formula or proof elaborating why it can deliver a higher return in the long haul than any other system. > Essentially, the Kelly Criterion is a mathematical formula for sizing bets or investments that lead to higher wealth compared to any other strategy in the long run. ![](https://cdn.oddspedia.com/images/betting/2021/09/kelly.jpg) This gambling method can determine the optimum amount of money an investor or bettor can invest or wager on an opportunity. The bet size of the Kelly criterion is found by optimising the anticipated value of the logarithm of wealth, which is equal to maximising the expected geometric growth rate. With this strategy, users bet a predetermined fraction of assets while considering the amount of money available to use and the expected returns. ## How to Use Kelly's Criterion The Kelly strategy formula is, in principle, straightforward - it is about having a bet size as large as the probability of a win, less the likelihood of a loss. It also calculates the optimal amount to guarantee the most excellent chance of success. The formula is: EXAMPLE for the Kelly Formula Using a dice as an example of Kelly Criterion staking When you roll a dice, the probability of landing on a 1, 2, or 3 is 50%, with the same applying to an outcome of 4, 5, or 6\. Let's assume the dice is biased and has a 55% chance of resting on a 1, 2, or 3\. This means the chances of it landing on a 4, 5, or 6 is 45%. The variables will be: * **P = 1** * **Q = 0.55** * **Q = 1 - 0.55 = 0.45** Based on the Kelly formula, f = (1 x 0.55 - 0\. 45) / 1 = 0.10 or 10% The strategy, therefore, suggests that you wager 10% of the portfolio at 10% of the bankroll. If the dice bias was less, at 51%, the Kelly formula recommends that you stake at 2%. In such a scenario, the strategy suggests that if a bettor or investor were to go above 10%, there is a high probability they would lose the wager. On the other hand, staking less than 10% would lead to smaller but consistent profits. Therefore, adhering to the Kelly strategy will optimise your capital growth rate in the long term. ## Kelly Criterion Example in Sports Betting The goal of the Kelly formula is not to go broke. The equation can be used to calculate the amount to bet on so that you can survive and keep playing. It states the correct amount of money to wager relative to the size of your betting bankroll. From a sports betting perspective, let's say a proposed wager has odds of 3.00\. The probability of winning is 0.40, making the probability of losing 0.60. > (( 3 x 0.40) - 0.60 ) / 3 = 0.20 Based on the formula, you should stake 0.2 (i.e. 20%) of your bankroll on the proposed wager. While the chances of failing are more significant than the chances of succeeding, it is a bet with a positive expected value due to the favourable odd sizes. Doing this, in theory, means the overall returns will be higher in the long run, and the overall losses will be lower. When used with your preferred modelling tools and sports analytics, the Kelly strategy can establish value on the odds board and guide you on the amount you should wager. * [![Bwin](/placeholder.svg)](/bookmakers/bwin "Bwin Review") 5 100% Bonus bis zu 100€ Offer applies automatically Claim bonus Teilnahme nur für Neukunden. 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Der Bonus-Code ODDSPEDIA kann während der Anmeldung benutzt werden, jedoch ändert dies den Angebotsbetrag in keinster Weise. * [![Betano](/placeholder.svg)](/bookmakers/betano "Betano Review") 4.9 20€ Freiwette + 100% bis zu 80€ Wettbonus BETANO20 Claim bonus Konto verifizieren und eine 20€ Freiwette erhalten, ganz ohne Einzahlung. 18+ AGB gelten. * [![Betway](/placeholder.svg)](/bookmakers/betway "Betway Review") 4.8 Bis zu 100€ als Freiwette Offer applies automatically Claim bonus Erhalten Sie eine angepasste Gratiswette von bis zu 100€, wenn Ihr erster Akkumulator nicht gewinnt. Mindest. Einsatz: 10€. Maximal abgestimmte Gratiswette: 100€. Kombiwetten mit einer Quote über 15,00 qualifizieren sich nicht für dieses Angebot. Nur für 18+ Neukunden aus aus Deutschland. * [![bet-at-home](/placeholder.svg)](/bookmakers/bet-at-home "bet-at-home Review") 4.8 500% Quotenboost + 100€ Bonus WELCOME100 Claim bonus Der Quotenboost gilt für eine beliebige Prematch-Einzelwette (Min. Quote = 1.20), versechsfacht die ausgewählte Wettquote und kann innerhalb von 30 Tagen 1x bei der Wettabgabe unter “Bonusangebote” genutzt werden. Angebot gültig für Neukunden. 18+ Es gelten die AGB. ## Conclusion The Kelly strategy can be used to find the optimal bet size for a wager. Not only can it be used for casino games and sports matches, but it can also be used in the stock market. The good thing about the Kelly Criterion is that it offers a distinct advantage over other staking strategies - it is a lower-risk strategy and guarantees profits in the long run. Pros vs Cons ![Thumb Up](/placeholder.svg) ![Thumb Down](/placeholder.svg) * It offers good protection against losses. You lose less in case of prolonged failures as the bank decreases with a decrease in the subsequent stake * Allows you to earn frequently. A higher bankroll increases the rate, which enables you to increase the gain significantly * It prevents placing wagers where a positive expected value does not exist * The strategy does not consider the volatility of the market and the effects variance can have on outcomes * A bettor's specific investing constraints can override the desire for a maximum growth rate * Managing multiple edges on concurrent bets with the Kelly strategy is hard ## Kelly Criterion Betting System FAQ ### ❔ Who was Kelly? John Larry Kelly Jr. was an American scientist who worked as a researcher at AT&T's Bell Laboratories in New Jersey. He developed the Kelly strategy from a system he had created to analyse information transmitted over networks. He served as a pilot in the US Navy during World War II before joining the University of Texas at Austin, where he graduated with a Ph.D. in Physics in 1953. ### 🏆 Is the Kelly Criterion Betting Strategy Illegal? No. There is no prohibition against using the Kelly Criterion to bet or invest. For gamblers, as long as you are betting on a [legal gambling site](https://oddspedia.com/bookmakers), you can bet as much as you want. The only limits are your bankroll and the maximum stake amount. ### 💶 Is the Kelly Criterion System Allowed in Bookmakers? Yes. The Kelly Criterion is a betting strategy like any other, and it can be used at any betting site to limit losses and maximise gains. ### 💳 Is Kelly's Criterion a Safe Method for Betting? The Kelly strategy is a safe method and can be used as a general money management system for both betting and investing. The strategy is prevalent and is used as a revered staking plan among stock market investors and sports bettors to gain an edge. The Kelly bet is popular among big investors, including Berkshire Hathaway's Warren Buffet, Charlie Munger, and Bill Gross. ### 🤔 Can I Bet on Football with The Kelly Criterion Formula? The Kelly strategy applies to almost [all forms of gambling](https://oddspedia.com/betting), including wagering on football. It is even one of the most favoured methods of football betting as it promises to provide higher profits when compared to other betting strategies. Before you go, do not forget to share with your friends: * [![Facebook Icon](/placeholder.svg)](https://www.facebook.com/oddspediaglobal) * [![X Icon](/placeholder.svg)](https://x.com/oddspedia) * [![Instagram Icon](/placeholder.svg)](https://www.instagram.com/oddspediaglobal) * [![Telegram Icon](/placeholder.svg)](https://t.me/oddspedia) This article was written by our team of betting experts, any contributing references are noted below. Last updated 23/02/2024 References 1. Wikipedia contributors. (2022a, January 7). Kelly criterion. Wikipedia. 2. 3. Thorp, E. The Kelly Criterion in Blackjack, Sports Betting, and the Stock Market. Paper presented at The 10th International Conference on Gambling and Risk Taking. 1997. 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(2022a, January 7). Kelly criterion. Wikipedia. https://en.wikipedia.org/wiki/Kelly_criterion","https://www.math.ucla.edu/~tom/stat596/Kelly.pdf","Thorp, E. The Kelly Criterion in Blackjack, Sports Betting, and the Stock Market. Paper presented at The 10th International Conference on Gambling and Risk Taking. 1997."]} {"@context":"https://schema.org","@type":"FAQPage","mainEntity":[{"@type":"Question","name":"Who was Kelly?","acceptedAnswer":{"@type":"Answer","text":"John Larry Kelly Jr. was an American scientist who worked as a researcher at AT&T's Bell Laboratories in New Jersey. He developed the Kelly strategy from a system he had created to analyse information transmitted over networks. He served as a pilot in the US Navy during World War II before joining the University of Texas at Austin, where he graduated with a Ph.D. in Physics in 1953."}},{"@type":"Question","name":"Is the Kelly Criterion Betting Strategy Illegal?","acceptedAnswer":{"@type":"Answer","text":"No. There is no prohibition against using the Kelly Criterion to bet or invest. For gamblers, as long as you are betting on a legal gambling site, you can bet as much as you want. The only limits are your bankroll and the maximum stake amount."}},{"@type":"Question","name":"Is the Kelly Criterion System Allowed in Bookmakers?","acceptedAnswer":{"@type":"Answer","text":"Yes. The Kelly Criterion is a betting strategy like any other, and it can be used at any betting site to limit losses and maximise gains."}},{"@type":"Question","name":" Is Kelly's Criterion a Safe Method for Betting?","acceptedAnswer":{"@type":"Answer","text":"The Kelly strategy is a safe method and can be used as a general money management system for both betting and investing. The strategy is prevalent and is used as a revered staking plan among stock market investors and sports bettors to gain an edge. The Kelly bet is popular among big investors, including Berkshire Hathaway's Warren Buffet, Charlie Munger, and Bill Gross."}},{"@type":"Question","name":" Can I Bet on Football with The Kelly Criterion Formula?","acceptedAnswer":{"@type":"Answer","text":"\nThe Kelly strategy applies to almost all forms of gambling, including wagering on football. It is even one of the most favoured methods of football betting as it promises to provide higher profits when compared to other betting strategies."}}]} ```