Tips for Kelly Criterion Stake Sizing in Sports Betting

We moved! Read about the Kelly Criterion strategy on our new site.

Devised by J.L. Kelly in 1956, the Kelly Criterion is a formula employed in sports betting to determine the most effective stake amounts.

The objective of the Kelly Criterion is to balance risk and maximize potential gains, taking into account the bettor’s current funds, the odds of the bet, and the genuine likelihood of a particular result.

The Kelly Criterion stake management strategy‘s purpose in sports betting is to lower the negative effects of prolonged losing streaks while boosting profits and achieving long-term success.

What is Kelly Criterion in sports betting?

The Kelly Criterion is a mathematical formula that can be applied in sports betting to help bettors calculate the most optimal stakes. This formula was initially developed by J.L. Kelly in 1956.

The original goal of this formula was to increase wealth by optimizing financial portfolios. Later bettors started using the formula to achieve a more effective stake-sizing strategy.

The Kelly Criterion strategy method in sports betting has the role of reducing the risk and increasing the reward/winnings most optimally.

It has the biggest role in value betting strategies where the goal is to generate profits in the long run.

The formula takes into consideration factors such as the size of your actual betting balance, the odds you want to bet on, and the true probability of the outcome to win.

The goal of the Kelly Criterion staking system in sports betting is to reduce the effect of long losing streaks to avoid losing the whole betting balance.

It also has the role of enhancing the winnings when facing longer winning streaks. Both roles of the Kelly staking method are applied with the final goal of getting the most optimized results in the long run.

Relevant article -> Check my list and guide on the best EV betting tools.

What is the formula for Kelly Criterion in betting?

The Kelly Criterion formula in sports betting can be summarized as follows:

f = (bp-q)/b

The explanation of this formula:

• f is the fraction of your actual balance you need to use as a stake
• b is the odds you need to place a bet on in decimal format – 1. (For example, if the bet pays 3 to 1, then b=3)
• p is the probability of winning the bet
• q is the probability of losing the bet (which is 1−p)

The components of the Kelly Criterion formula in betting:

– The numerator (bp – q) calculates your ‘edge’, which is the expected profit per dollar wagered.

– The denominator b is the odds you’re getting on the bet, adjusted for the fact that odds are typically quoted including the return of the stake.

The result, f, represents the optimal proportion of your bankroll that you should wager on a given bet to maximize your long-term growth rate.

How to use Kelly’s criterion in sports betting?

To use the Kelly Criterion in sports betting, you need to calculate your positive EV (expected value), also mentioned as edge, determine the odds, and apply the Kelly Criterion formula.

1. Calculate Your Edge

Calculating the positive expected value/edge over the bookmaker is the first and essential part of applying the Kelly Criterion staking method properly.

This calculation is done by estimating the statistical probability of a sports outcome you want to bet on (signed as p in the formula) and comparing it with the probability implied by the odds offered by the bookie. 

As an example, if you calculate that a football team has a true 50% chance of winning, but the sportsbook offers odds that reflect a 40% chance, you have an edge.

2. Determine the odds

The easiest way to calculate the Kelly Criterion stake for your bet is by using odds in decimal format. In case your odds are in Moneyline or Fractional format you can use a simple odds converter like this and you can take the next step.

3. Apply the Kelly Formula

In the next step, you need to substitute each data/info about your betting opportunity into the Kelly Criterion formula. The result will be the percentage of your bankroll you need to use in that specific betting opportunity.

4. Calculate Your Bet Size

If you multiply the fraction obtained in the previous set from the Kelly formula by your total betting bankroll you will get the exact stake you need to use. 

Your total bankroll when using the Kelly Criterion formula for betting can be your actual balance on your bookie account or the overall money you allocate for wagering.

5. Consider Using Fractional Kelly

Sports bettors face variances daily. This betting-related phenomenon can destroy your balance even when using the Kelly Criterion staking strategy.

For this reason, many bettors choose to use the so-called Fractional Kelly staking method. 

It means instead of using the whole stake advised by this formula, you can reduce the risked money by using half or a quarter of the recommended stake.

This fractional Kelly staking method reduces the effect of long losing streaks. It also has the advantage of reducing the effects of a wrongly calculated positive EV of a bet.

6. Monitor and adjust Kelly staking

Many times bettors don’t have the desired results even when using the most effective Kelly Criterion staking strategy. It can have many reasons why you fail, such as not being able to define the true probability of an outcome in an accurate way.

By monitoring your results with a spreadsheet or an automated tracking system like RebelBetting, you can spot mistakes.

Adjusting the fraction of your Kelly staking or the markets/odds ranges used in your strategy can significantly increase your long-term results.

What is an example of a Kelly criterion stake sizing in betting?

Football example for Kelly Criterion staking:

– Event: A football match between Team A and Team B.

– Your Assessment: You estimate that Team A has a 50% chance of winning the event.

– Bookmaker’s Odds: the sportsbook offers odds of 2.15 for Team A’s win.

Making early calculations:

1. Determining the Variables for the formula:

– p (Your Estimated Probability of Winning): 50% or 0.50.

– q (Probability of Losing): The complement of p, which is 50% or 0.5 (1 – 0.50).

– b (Decimal Odds – 1): For odds of 2.15, b is 1.15 (since 2.15 – 1 = 1.15).

2. Kelly Formula Calculation:

– The formula is (bp-q)/b).

– Plugging in the values: (1.150.5-0.5)*1.15.

– The calculation becomes 0.075*1.15 = 0.0825

– So, the Kelly Criterion formula suggests you should wager 8.25% of your bankroll.

3. Determining Bet Size:

– If your total betting balance is $500, then according to the Kelly Criterion staking formula, you should bet 8.25% of $500, which is $41.25.

Kelly Criterion example summary:

As mentioned above, the stake size advised by the Kelly Criterion formula can seem high.

For this reason, many bettors should use a fraction of this stake. In this example using a stake of $20 or even $10 would generate significantly less profits in the long run. 

But proportionally decreasing the Kelly stake will guarantee facing fewer risks of losing the whole betting balance when losing many bets in a row.

What are the advantages of the Kelly Criterion stake sizing strategy?

The Kelly Criterion stake sizing method shows its main advantages when used with value betting strategies.

1. Protects your bankroll: The Kelly Criterion is praised for its great effectiveness in protecting your bankroll when facing long losing streaks. Every time you lose a football bet, the stake will be lowered proportionally. 

This means if you suffer losses, the next stake amount will decrease in line with your lower bankroll. The more bets you lose in a streak, the smaller your bets will be so you can have more chance to recover from losses.

2. Prioritizes long-term perspective: The Kelly Criterion stake sizing has the advantage of keeping the long-term optimized profits in focus instead of gaining fast results. This approach helps bettors stay more focused by excluding the emotional factors in facing a losing or winning streak.

3. Weighting on value size: The Kelly staking strategy has a unique advantage over other methods. It takes the edge over bookies into consideration. 

This approach helps bettors make more profits in the long run and decreases the stakes on betting opportunities with a low value.

What are the downsides of Kelly Criterion stake sizing in betting?

While it has many great advantages, the Kelly Criterion staking approach has some serious downsides such as the limited opportunities to apply it.

1. Accuracy of Edge calculation: One of the biggest downsides of this staking strategy is the need to know/calculate the edge over bookies. This calculation is not only time-consuming, but it requires many steps where you can make a mistake.

In case your method of calculating the true probability of an outcome is wrong, using the Kelly Criterion strategy is not profitable.

Another aspect of this downside is that you will notice this mistake only in the long run due to the nature of the staking strategy itself.

2. Oversized stakes: As you saw from the example above, the Kelly staking strategy can suggest a large % of your bankroll as a stake. Strictly following the calculations can lead to an aggressive staking strategy.

In the majority of cases, following the fractional Kelly staking method is the best solution to this oversized stake issue. It will slow down the growth of your betting capital with the upside of significantly reducing the risk of losing your whole betting balance.

3. Variance not taken into consideration: The Kelly Criterion staking method does not offer a direct solution to variance in value betting. While it optimizes long-term profits, in some cases you should change the stakes according to your situation.

As an example, after a long losing streak, using the normal Kelly Criterion stake can have a bigger psychological effect. Based on my experience, staking strategies such as this are great guiding tools but you always need to consider human factors.

Is the Kelly Criterion or flat staking better for betting?

Using the right stake sizing strategy between Kelly Criterion and flat staking for betting depends on multiple factors, such as your balance size, risk tolerance, and the strategy you use.

We already know how the Kelly style staking method works, so here are a few info on flat staking.

The flat staking sports betting staking method involves wagering the same amount on every bet regardless of your edge and odds used. 

1. Risk Management: While using the flat staking method the risk gets lower as your bankroll grows. The Kelly Criterion can result in huge stakes when your betting balance grows.

The risk of using the Kelly method does not grow when the balance is bigger. With flat staking, on the other hand, the risk level changes all the time.

2. Profit Potential: Using the Kelly style staking has a higher profit potential in the long run compared to flat staking.

3. Usability/complexity: The Kelly Criterion stake sizing method requires more effort and time investment compared to flat staking.

While following a value betting strategy the odds are dropping fast, which makes the manual Kelly stake calculation almost impossible. Flat staking on the other hand does not require effort or time investment.

In summary, flat staking is a more beginner-friendly method, with the downside of lower profit potential.

The Kelly Criterion [1] sports betting stake sizing strategy is more profitable in the long run but it requires more skills, time, or an automated in-built stake calculator to use it effectively.

Is the Kelly Criterion stake management the best for football betting?

The Kelly Criterion [2] stake size management strategy is the best for football betting only if it is included in betting software. An in-built calculator automatically includes the edge over bookies and displays the desired stake instantly. 

You can also check my relevant article on the most profitable football betting strategies.

FAQ