The Kelly criteria

The Kelly criteria betting system is based on odds mathematics, money management and value betting, invented and developed by scientist John L. Kelly. The purpose of Kelly criteria is to optimize the stake placed on each bet and to minimize (or even exclude) the risk of bankruptcy. It`s a method which is used not only in sportsbetting, but also in the financial markets.

With Kelly Criteria you will have to accurately estimate the probability for each of your bets to be successful. After you do that, you will use a formula that will tell you what percent of your bankroll  you should invest on that game. Because you use percentages of your balance, this system creates a progression opposite from Martingale: you bet less if you lose, you bet more if you win – hence the impossibility of bankruptcy.

Kelly Criteria uses a formula to determine the optimal stake in the following way:

Percentage of total balance invested on a bet = (Probability of win * odds )  -1 / odds -1

For better understanding, let`s take the following example: Barcelona plays Real Madrid at home and is priced at 1.95. Your analysis says that Barcelona has a 55% chance of winning the game.

55/100*1.95 -1 / 1.95-1 = 0.55*1.95 -1 / 0.95 = 0.0725 / 0.95 = 0.0688.

This means the optimal stake to place on a Barcelona win is 6,88% of your total bankroll.

Be careful, if your result is negative it means you should stay away of the respective bet.

But how can you accurately predict the chances for a bet to be won?  If you are too optimistic you will lose money, if you are too pessimistic you will win less then you should. There is no magical formula for this, it only comes with work, good analysis and experience. It`s not an easy thing to do, and this is one of Kelly Criterias downsides. The other one is its low progression rate: you will not see huge wins, instead your profit will be small and consistent. It`s a system that should be used with patience over a longer period of time.

All in all, Kelly Criteria is probably the closest thing to a winning system you will ever get. It implies good analysis, betting knowledge, odds understanding and moneymanagement. If you are looking for a low-risk– small but consistent reward approach to sportsbetting, Kelly Criteria could provide you with what you need. But again, you need to be able to predict as well as the bookmakers, or even better.  It`s a betting strategy for the professional punters who are not in the industry just to make a quick and easy buck.