Kelly Criterion
A mathematical formula that determines the optimal bet size based on your edge and bankroll, maximizing long-term growth while minimizing risk of ruin.
The Formula
Kelly % = (bp - q) / b
Where:
- b = decimal odds - 1 (net profit per dollar)
- p = probability of winning
- q = probability of losing (1 - p)
The result tells you what percentage of your bankroll to wager on a single bet.
Practical Example
You find a bet at +150 (2.50 decimal) and estimate the true probability of winning at 45%.
- b = 1.50
- p = 0.45
- q = 0.55
Kelly % = (1.50 × 0.45 - 0.55) / 1.50 = (0.675 - 0.55) / 1.50 = 8.33%
With a $10,000 bankroll, the Kelly Criterion recommends a $833 bet. This maximizes your long-term growth rate given your estimated edge.
Why It Matters for Bettors
Most bettors either bet too much (risking ruin) or too little (leaving profit on the table). The Kelly Criterion solves this by mathematically balancing growth against risk. It’s the only staking method proven to maximize the geometric growth rate of your bankroll over time.
However, full Kelly can be volatile. Many sharp bettors use fractional Kelly (typically half or quarter Kelly) to reduce variance while still capturing most of the long-term growth. Half Kelly gives you 75% of the growth rate with significantly less drawdown.
Key Considerations
- Accuracy matters, Kelly assumes your probability estimate is correct. Overestimating your edge leads to overbetting, which is more damaging than underbetting.
- Never exceed full Kelly, Betting more than Kelly suggests actually decreases your long-term growth rate.
- Simultaneous bets, When placing multiple bets at once, reduce each bet’s Kelly fraction to account for shared bankroll exposure.
Tools That Use Kelly Criterion
- OddsJam, Includes Kelly stake recommendations alongside +EV bets
- RebelBetting, Offers Kelly-based staking in its value betting module
- Trademate Sports, Uses Kelly sizing for professional bankroll optimization