The Kelly Criterion
A mathematical staking formula that sizes each bet to your edge, maximising long-term growth.
The Kelly Criterion calculates the optimal stake as a fraction of your bankroll based on your edge and the odds — the bigger your advantage, the larger the stake.
How it works
Kelly maximises long-term bankroll growth in theory. The formula is (bp − q) ÷ b, where b is the decimal odds minus one, p your estimated win probability and q is 1 − p. Because full Kelly is aggressive and unforgiving if your probability estimates are even slightly off, most experienced bettors use 'fractional Kelly' — a half or quarter of the recommended stake — for most of the growth with far less volatility.
Worked example
At odds of 2.00 (b=1) with a 55% edge (p=0.55, q=0.45), Kelly suggests staking (1×0.55 − 0.45) ÷ 1 = 0.10, i.e. 10% of your bankroll. Half-Kelly would stake 5% — far safer if your 55% estimate is optimistic.
Pros
- Sizes stakes to the strength of your edge
- Theoretically optimal long-term growth
- Automatically bets less when the edge is small
Cons
- Very sensitive to inaccurate probabilities
- Full Kelly is highly volatile
- Overestimating your edge leads to overstaking
Tips
- Use half or quarter Kelly to tame volatility.
- It's only as good as your probability estimates.
- Cap any single stake at a sensible maximum.
FAQ
- Is the Kelly Criterion better than flat staking?
- It can grow a bankroll faster when your edge estimates are accurate, but it's riskier. Flat or fractional-Kelly staking is safer for most bettors.
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Related terms
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