Kelly's strategy in sports betting: description, calculation formula and examples for beginners
The Kelly Criterion will keep your bank safe even after a long streak of failures. Everyone can learn the calculation formula, but use units correctly. In this article, we will analyze the Kelly criterion and its main flaw, as well as look at other bank management strategies.
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Kelly criterion in betting
The Kelly Criterion is the principle of bank management for value betting. This strategy allows you to determine the size of the rates depending on the bank and previous results.
Determine the bet amount according to the Kelly criterion using the formula :
((K x P - 1) / (K - 1)) x R x B , where K is the odds, P is your probability estimate, B is the pot size, R is the percentage of successful bets.
If you have played 30 bets out of 100, then R = 0.30. The Championship recommends to beginners to use R = 0.25.
After 100 bets, estimate the passability and use the new R value.
You can also use an online calculator to calculate the bet amount based on the Kelly criterion.
Value bet or value is a bet on an underestimated event, when the probability of a particular outcome is higher than the bookmaker thinks.
The rate is valuable if:
K x P> 1 , where K is the coefficient, P is your estimate of the probability.
Example of a value bet
Let's imagine that in the match "Spartak" - "Rubin" the bookmaker offers the odds of 1.70 for the home win, and in your opinion, the red-whites have 70% for the win.
We estimate the rate:
1.70 x 0.7 = 1.19> 1, this is value.
Determine the possible profit at a distance using the formula :
N x S x (K x P - 1) , where N is the number of bets, P is your estimate of the probability, K is the odds, S is the amount of the bet.
If you make 100 similar bets in the amount of 500 rubles, with a correct estimate of the probability, the profit will be 9,500 rubles: 100 x 500 x (1.70 x 0.70 - 1).
Read more about value betting here: Valuable bets scare the bookmakers. What is value, how to find it and calculation examples
The essence of the Kelly criterion for beginner players
By applying the Kelly criterion, you are not risking the entire pot size, but only a small fraction of it. Over the long run, even with a series of failures, you will save some of the money.
For example, your bank is 10,000 rubles. Consider the first three bets:
- In the meeting "Zenit" - "Ural" bookmakers gave a coefficient of 2.65 for the total goals over 3.5, and you estimated the chance of this outcome at 60%. Checking the bet: 2.65 x 0.6 = 1.59, this is a value.
Determine the bet amount: ((2.65 x 0.6 - 1) / (2.65 - 1)) x 0.25 x 10,000 = 894 rubles.
Zenit won with a score of 7: 1, the bet entered, the payout was 2369 rubles: 894 x 2.65. In the bank 11,475 rubles: 10,000 - 894 + 2369.
- In the match "Akhmat" - "Dynamo" the odds for a home win or a draw was 1.60, and you thought that the bet would come in with a 70% probability. We determine that this is a value: 1.60 x 0.7 = 1.12.
We calculate the bet amount: ((1.60 x 0.7 - 1) / (1.60 - 1)) x 0.25 x 11 475 = 574 rubles.
“Akhmat” lost with a score of 2: 3, the bet was lost. In the bank 10 901 rubles: 11 475 - 574.
- In the match between Rostov and CSKA, the bookmakers set a coefficient of 2.80 for the home win, and you estimated the winnings of the yellow-blues at 45%. Value bet: 2.80 x 0.45 = 1.26.
Determine the bet amount: ((2.80 x 0.45 - 1) / (2.80 - 1)) x 0.25 x 10 901 = 394 rubles.
Rostov won 3: 2, the bet was played, you got 1103 rubles: 394 x 2.80. In the bank 11 610 rubles: 10 901 - 394 + 1103.
Other strategies for managing bank size
In addition to the Kelly criterion, there are several other strategies for bank management in betting:
Fractional Kelly test
You are betting a fraction of the amount calculated according to the Kelly criterion. For example, 50%.
After each loss, you increase the next bet or odds so that you get a profit on the first run.
Read more about the Martingale strategy here: Martingale strategy in sports betting: catching up safely or losing system
After each failure, you increase the amount of the next bet by the selected unit, and after winning, you decrease it by the same value.
You bet the same amount regardless of the odds and the size of the pot.
Fixed interest from the bank
You bet the same percentage of the pot. Calculate the amount before each bet.
The lack of the Kelly criterion in sports betting
The difficulty lies in the fact that you need to correctly assess the likelihood of a particular event. The strategy helps to determine the amount of the bet depending on your assessment and previous results. With a high-quality analysis of matches, you will increase the chances of profit.
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