- An introduction to the Kelly Criterion and its benefits
- Understand the Kelly Criterion with a simple coin toss example
- Use a helpful Kelly Criterion calculator for any bet
For bettors seeking an edge, mathematical strategies trump gut feelings every time. A prime example of such an approach is the Kelly Criterion, which helps bettors determine the ideal stake amount. Keep reading to learn more.
Before laying down a wager, bettors should ponder six critical questions: who, what, when, where, why, and how? For the purposes of this discussion, we're focusing on 'how' – specifically, how much to bet, utilizing the Kelly Criterion.
Imagine you're betting on the English Premier League. Here's how these questions might break down:
Who to bet on? Manchester United
What to bet on? Top 4 finish
When to bet on? Now
Where to bet on? 7x7Bets tend to offer the best odds
Why to bet on? They seem to be under-priced
How much? How much to bet on this outcome?
While most discussions center on the first five queries, employing statistical and mathematical logic to justify the 'why' – as seen in discussions on using Monte Carlo simulations – the question of 'how much to bet' remains paramount.
In finance, choosing where to invest isn't the only challenge; deciding how to allocate one's resources across various investments is equally critical. Likewise, a gambler's key decision is not just what to bet on, but how much to bet.
The Kelly Criterion, or variations thereof, comes highly recommended by numerous studies, including a 2013 article in The Journal of Gambling Business and Economics. This formula suggests betting a fraction of your bankroll on a bet with odds better than expected, thereby promoting exponential growth of your funds.
The Kelly Criterion formula is:
(BP - Q) / B
B = the Decimal odds -1
P = the probability of success
Q = the probability of failure (i.e. 1-p)
Using a coin as an example of Kelly Criterion staking
Consider a bet on a coin landing heads at odds of 2.00. If the coin is biased with a 52% chance of landing heads, the calculation is as follows:
In this case:
P= 0.52
Q = 1-0.52 = 0.48
B = 2-1 = 1.
This works out at: (0.52x1 – 0.48) / 1 = 0.04
Hence, the Kelly Criterion advises a 4% stake. A positive value indicates an advantage for your bankroll, facilitating exponential growth.
In comparison to other staking strategies like the Fibonacci or Arbitrage methods, the Kelly Criterion presents a lower risk profile. Nevertheless, it demands accurate estimation of an event's likelihood and strict adherence to avoid the quick depletion of your bankroll.
Now you know how to use Kelly Criterion for betting. Sign Up Now or click HERE to play at 7x7Bets, the most reliable and trustworthy online casino in India. Don't forget to claim your withdrawable real money welcome deposit bonus, weekly cashback bonus and referral bonus!
Comments