What is the Kelly Criterion?

In betting, the Kelly Criterion is a calculation which determines the ideal amount of your bankroll to bet based on the probability of winning and the available odds. The goal is to make your bankroll grow faster than via other staking methods (e.g. flat staking).

If you would like to take a deep dive on the Kelly Criterion you can check out this Wikipedia article. Here we will just take a look at the formula itself.

Let's look at an example taken from our Value Betting software (available on the Pro tier):

The Kelly formula is: f = ( p * ( o - 1 ) - q ) / ( o - 1 )

f = fraction of bank roll to bet

o = decimal odds

p = probability of bet winning

q = probability of bet losing ( 1 - p )

In our example this would look like:

The formula calculates the percentage of your bank roll to bet. However, this does not take into account sustainability, rounded stakes, markets limits etc, so you may not want to follow it blindly.

Most people will also apply what is known as Fractional Kelly. Although Full Kelly will provide you with the most Expected Value (EV), it can also be high-risk. If you hit a run of bad variance you could wipe out your bankroll before the EV is realised. By applying a Fractional Kelly you can reduce this risk.

The Value Betting software displays Quarter Kelly - where the Kelly stake is divided by four - by default. You can change this to Half Kelly or Full Kelly if you wish, but it is not something we would recommend.

Away from the Value Betting software, you can also use the Kelly Calculator on our website to enter your own odds and probability data. If you also include your bankroll it will display the exact dollar amount to bet as well.