The Kelly criterion formula: A guide to managing risk & reward

The Kelly criterion sports betting formula helps you decide how much to bet based on your odds and your chance of winning when sports betting. By using this method, you can grow your bankroll over time while keeping your losses in check.

Key takeaways:

• The Kelly criterion formula focuses on your edge, which is the value between the odds offered and your predicted chance of winning. With this system, instead of guessing or going all in, you’ll base each wager on math.
• Some of the benefits of the Kelly criterion sports betting system are reducing risk, maximising long-term profit, and adding structure and discipline to your betting session.

Learn how to use the Kelly criterion in sports betting and the best tips to make the most of this bankroll management strategy in this guide:

What is the Kelly criterion in sports betting?

The Kelly criterion centres around how much you should bet based on your edge, or how likely you think you are to win. The goal is to grow your money over time without losing it all. 

To use the Kelly criterion, you need two key inputs: your edge and the odds. Your edge is the probability you believe you have of winning the bet, while the odds are what the bookmaker offers.

The Kelly criterion betting formula is:

(B x P - Q) / B

• B → The decimal odds minus 1
• P → The probability of success (in decimal)
• Q → The probability of failure (out of 100%)

For instance, you bet on a football team with odds of 3.00 and you think the team has a 70% (0.70) out of 100% chance of winning. In this case:

• B → 3.00 - 1 = 2.00
• P → 70% (0.70)
• Q → 100% - 70% = 30% (0.30)

Formula: (2.00 x 0.70 – 0.30) / 2.00 = 0.55 (55%)

This means that the Kelly criterion recommends wagering 55% of your bankroll on this bet. A positive percentage means you have a higher edge and can potentially grow your bankroll over time.

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Pros and cons of the Kelly criterion formula

The Kelly criterion has many perks but also comes with challenges. Weigh these pros and cons carefully to see if it fits your betting style:

Pros

• Maximise gains → The Kelly criterion betting helps you find the best amount to wager. By betting the right size, you can grow your bankroll faster. It focuses on long-term growth rather than quick wins.
• Reduce risk → One of the advantages of using the formula is that it helps limit your losses. By only betting a portion of your total budget, you’re less likely to overspend. This keeps you in the game longer.
• Clear strategy → With the Kelly criterion, you have a clear plan. You assess the odds, your chances of winning, and then decide how much to bet. This method takes the guesswork out of betting.
• Avoid emotional bets → When you follow a set formula, you reduce the chance of making bets based on feelings. Instead, you rely on math and logic, which leads to more informed decisions.
• Focus on value → The criterion encourages you to seek value. It helps you identify bets that offer good odds relative to the risk, increasing your chances of winning.
• Long-term success → Using the Kelly formula isn’t just about one game. It’s about the long haul. By sticking to this method, you build a more stable profit over time.
• Enhanced decision-making → The Kelly criterion forces you to analyse each bet carefully. You evaluate not just the odds, but also your confidence in the outcome.
• Encourages discipline → Sticking to the Kelly criterion builds discipline. You learn to resist the urge to chase losses or make reckless wagers. This discipline is key to good bankroll management.
• Builds confidence → Seeing consistent gains with the Kelly Criterion can help build your confidence over time. You’ll feel more in control and less anxious about your bets. This mental boost enhances your overall betting experience.

Cons

• Complex math → The Kelly criterion calculation can seem tough to grasp at first. You need to calculate your edge and the odds, which can be tricky for new bettors. If you’re not great with numbers, this might feel a bit overwhelming.
• Short-term losses → The Kelly criterion is meant for the long run, but you can face short-term losses. This can be hard to handle, especially if you’re not used to seeing dips in your bankroll.
• Requires discipline → Using the Kelly criterion means you need strong self-control. It’s easy to stray from the plan, especially after a win or loss. If you give in to emotion, you may not stick to the formula.
• Market changes → The odds shift quickly in sports. If you don’t adjust your bets in real time, you might miss out on better opportunities. This makes sticking to the Kelly criterion more challenging.
• Bankroll limits → The formula may suggest larger bets when you see a strong edge. If your bankroll is small, this can be risky. You need enough funds to follow through with the wagers it recommends.
• No instant gains → If you’re looking for quick wins, the Kelly criterion isn’t for you. It focuses on long-term growth, which can feel slow. 

Common mistakes to avoid when using the Kelly criterion formula

Here are some common mistakes to avoid when using the Kelly criterion, especially when learning how to place smart sports bets:

Miscalculating edge

One of the biggest mistakes is misjudging or not knowing your true edge. If your computation is wrong, your bet size will be off. Take the time to analyse the odds and your chances before placing a wager.

Betting too much

It’s easy to get excited and bet more than the formula suggests. Remember, the Kelly criterion is meant to grow your bankroll slowly. Stick to the amount it advises, even if you feel confident.

Ignoring variance

Variance is a part of betting. Just because the formula says to bet a certain amount doesn’t mean you’ll win every time. Accept that losses are part of the process, and don’t let them shake your confidence in the method.

Not adjusting for risk

Each bet carries its own risk. If you’re unsure about a game, consider betting less than the Kelly amount. Being cautious helps protect your wager in uncertain situations.

Focusing on short-term gains

The Kelly criterion is about the long run, not quick wins. Avoid the urge to chase after immediate profits. Trust the process and give it time to work.

Neglecting bankroll size

Your bankroll size should guide your wagers. If your funds are low, adjust the bet amount accordingly. Don’t let the formula lead you to bet more than you can afford to lose.

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Tips to maximise the Kelly criterion formula in sports betting

Increase your chances of winning with the Kelly criterion by following these betting strategies:

Know your edge

Before placing a bet, clearly define your edge. This means understanding the odds and your chances of winning. Take time to do research and analyse information before betting.

Start with a small bet

If you’re new to the Kelly criterion, start with smaller bets. This helps you learn how the formula works without risking too much of your bankroll. As you gain confidence, you can increase your wagers.

Use a betting tracker

Keep a detailed record of your bets. Note the amount, odds, and results. This will help you see what works and what doesn’t, making it easier to adjust your strategy.

Stay updated

Keep up with news, stats, and trends. Injuries, weather, and team changes can all impact outcomes. Staying informed will help you refine your edge.

Be patient

The Kelly criterion is designed for long-term growth. Don’t get discouraged by short-term losses. Stay focused on the big picture and trust the process over time.

Adjust for risk

If a bet feels risky, consider reducing your stake. The formula is a guide, but your gut feeling matters too. It’s okay to play it safe when unsure.

Avoid chasing losses

If you have a bad run, resist the urge to bet more to make up for losses. Stick to your plan and let the formula guide you. Chasing losses leads to bigger problems.

Review and learn

After each betting cycle, take time to review your results. Identify what went well and what didn’t. Use these lessons to improve your strategy for next time.

Seek value bets

Look for bets that offer good value. This means finding odds that are in your favour compared to the risk. The Kelly criterion works best when you focus on value.

Best sports to try the Kelly criterion formula

Gamdom has many betting options where you can try the Kelly criterion. Top sports to use this formula on include:

Football

Football offers many types of bets, like spreads, handicaps, and moneylines. This variety lets you find value in different ways, making it ideal for the Kelly formula. There’s also plenty of stats and data for football. You can easily find team and player stats to assess your edge. Use this data to make informed decisions.

Esports

Esports is booming, with many games and leagues. This growth means more betting opportunities, making it a great fit for the Kelly criterion. Just keep in mind that player skill is key in esports betting. Research players and their past performance to spot valuable bets based on your edge.

Basketball

Basketball games often have high scores, creating more betting options. This scoring leads to more value bets, which work well with the Kelly criterion. With many games each week, you have many chances to place bets and test your strategy. This frequency allows for quick learning and adjustments.

Other popular sports betting strategies to explore

Aside from the Kelly criterion, here are other betting systems you can explore to make the most of your odds of winning:

• Martingale strategy → In this method, you start with a small bet and double it after each loss. The goal is to win back what you lost and make a small profit. However, be careful when using the Martingale system as a long losing streak can lead to bigger bets quickly. 
• Fibonacci strategy → Here, you place bets by following the Fibonacci sequence, where each bet is the sum of the two previous bets. For instance, if you bet 1 and then 1, your next bet would be 2, then 3, then 5, and so forth. It may take longer than Martingale, but it is safer in the long run.

Try the Kelly criterion when you bet on your favourite sports at Gamdom

Give the Kelly criterion sports betting system a try when you bet on sports at Gamdom. By applying Kelly’s edge-focused logic, you can make the most of every crypto bet you place. Start with low stakes and see how it works for you. This way, you can build your skills and confidence while enjoying the thrill of betting at Gamdom.

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