Betting | Kelly Criterion15/07/2017 19:50
Know how to use Kelly Criterion for betting. Kelly Criterion offers an advantage over the rest staking methods. Premier League example, football betting. With the help of Kelly Criterion for betting you can calculate the proportion of your own funds and your bet.
How to use Kelly Criterion for betting?
Premier League bet example
If you are a bettor you should not rely on your impulses but instead, you should look for a mathematical edge. If you want to determine how much you should stake then you should know how to use the Kelly Criterion for betting.
There are six important questions that you as a bettor should consider: where, when, who, how, why and what? Nonetheless, today we are going to mostly focus on how. Because that is the most important and how much to bet.
Placing a bet on the English Premier League match. Here is how you can adapt those six questions:
Who to bet on? –Manchester United.
What to bet on? –Top 4 finishes.
Where to bet on? The best odds seem like were offered by Pinnacle.
Why bet on?
In the most article, you can notice that the focus on five questions is not how much to bet. Answering ‘why’ with the help of mathematical or statistical justifications.
The secret when it comes to making financial decisions is not just finding the right financial products to invest in but as well as making a decision on how to subdivide one’s portfolio. But for bettors a really important question is how much to wager?
With the help of Kelly Criterion for betting you can calculate the proportion of your own funds to bet on an outcome whose odds are higher than expected so that your own funds grow exponentially. That is why Kelly Criterion is recommended by many papers.
Kelly Criterion formula
(BP – Q) / B
-B is the Decimal odds -1.
-P is the likelihood of success.
-Q is the probability of failure (i.e. 1-p).
If for example you bet on a coin to land on heads at 2.00 but the coin is biased and it has around 52% of landing on heads.
In this case with Kelly Criterion it would be:
Q=1-0.52 = 0.48
This would be like this (0.52×1 – 0.48) / 1 = 0.04, which means that Kelly Criterion for football betting is recommending you to bet 4%. And positive percentage means good for your bankroll so your funds can grow. Receiving negative percentage means that you should not wager on that outcome, so be careful.
It is important to realize that Kelly Criterion offers an advantage over the rest staking methods like Arbitrage and Fibonacci and there is a lower risk. But it needs a precise calculation of the likelihood of the eventual outcome. A discipline of this method will not provide growing of your bankroll.