# Kelly Criterion Sports Betting Strategy

The Kelly Criterion is a strategy that can be used in several

forms of gambling, including sports betting. It can also be a

resource for various forms of investing too, as its primary

function is to create the right balance between risk and reward

while reducing volatility. In relation to sports betting, it’s

about **maximizing potential returns on wagers** and minimizing the

chances of losing an entire bankroll. As these are two of the

fundamental goals when betting on sports, the Kelly Criterion is

a strategy worth exploring.

Although there are some complexities involved in using this

betting strategy, it’s popular among many bettors. In fact,

there are many professional gamblers who swear by it. However,

with that being said, there are also many experts who claim that

it’s useless. In this article we’ll try to establish who’s right

and who’s wrong.

To start with, we’ll answer two of the most commonly asked

questions about this strategy.

- What is the Kelly Criterion?
- How is the Kelly Criterion used in sports betting?

We’ll look at the math of this strategy too, explaining

exactly how it’s used in practice. We’ll also examine its

advantages and disadvantages and, to conclude, we’ll offer our

view on whether or not this strategy is worth using.

We’ve included this article on the Kelly

Criterion in our strategy section because using it is widely

considered to be a betting strategy in its own right. However,

it’s essentially just a specific type of staking plan. You might

also be interested in reading our article on staking plans and

how to use them for supplemental information on the subject.

## The Kelly Criterion & Sports Betting

The Kelly Criterion is basically a mathematical formula that

can be applied to determine the optimal sum of money that should

be invested or wagered on an opportunity. It takes into

consideration the total amount of money that’s available to use

and the expected return.

In a sports betting sense, it can therefore be used to

**calculate how much you should stake** on any wager you place. The

formula, which we’ll explain shortly, will calculate the

“correct” amount of money for you to risk relative to the size

of your betting bankroll.

This probably seems incredibly simple so far, but there’s

actually more to it than you would expect. In order to use the

formula effectively, you have to include the expected chance of

a wager winning. This is because the main purpose of the Kelly

Criterion as a betting strategy is to make sure that you stake

higher amounts when placing wagers with a higher probability of

winning and lower amounts when placing wagers that have a lower

probability of winning. In theory, doing this means your overall

returns will be higher and your overall losses will be lower.

The exact probability of any sports bet winning is uncertain

though, as it’s based on so many different factors. Working out

how likely a wager is to win ultimately comes down to some level

of personal opinion, so there’s certainly no way of coming up

with a definitive, correct answer. This is where using the Kelly

Criterion gets more complicated. It doesn’t work unless you can

assign probabilities with some degree of accuracy. This isn’t

easy to do, which is precisely why so many people lose money

when betting on sports.

For now, though, let’s assume that you are able to assign

probabilities to your wagers at least reasonably accurately.

With this assumption made, you need to learn the relevant math.

For the purposes of the Kelly Criterion formula,

it’s easiest to use odds in the decimal format. If you aren’t

familiar with this format, we would advise

using our odds

convertor tool. This can help you convert odds from either

moneylines or fractional formats into decimal formats.

## The Kelly Criterion Formula

To use the Kelly Criterion as a betting strategy, you have to

apply the following formula every time you place a wager.

This formula doesn’t tell you much by itself. You need to

understand what all the components represent, which we explain

below.

**“b”**is the multiple of your stake you can win from the proposed

wager. With decimal odds, b is equal simply to the odds minus 1. For

example, a $10 wager at 3.00 returns a total of $30 including the initial

stake. The amount won is $20 or a multiple of 2 based on the stake.**“p”**is the probability of the proposed wager winning. For example,

a wager with a 40% chance of being successful has a probability of winning of 0.40.**“q”**is the probability of the proposed wager losing. Using the

same example of a wager with a 40% chance of being successful, there must be a 60%

chance of it losing (assuming no pushes/ties). The probability of it losing is

therefore 0.60. “q” can be calculated simply as 1 minus “p”.**“f”**is the solution to the formula and provides you with the

suggested fraction of your bankroll to stake on the proposed wager.

Let’s see how the formula works based on the examples in the

above description. We’ll say the proposed wager has odds of

3.00, that the probability of it winning is 0.40, and that the

probability of it losing is 0.60.

Based on this formula, you should be staking 0.1 (i.e. 10%)

of your bankroll on the proposed wager. Even though the chances

of it losing are greater than the chances of it winning, it’s a

wager with **positive expected value** due to the favorable size of

the odds.

## Kelly Criterion & Expected Value

Positive expected value, if you’re not familiar with the

term, is when the probability of a wager winning is higher than

the implied probability of the odds. For example, odds of 2.00

have an **implied probability** of 0.50. The implication is that a

wager at these odds has roughly a 50% chance of winning. If your

personal belief is that such a wager has more than 50% chance of

winning, then it has positive expected value.

We’ve provided a very brief explanation

of value here, but this is something you should know all about

if you’re serious about your sports betting. We strongly suggest

referring to our article on the concept of value if this is

something you don’t completely understand yet.

It should be noted that that the Kelly Criterion formula only

really works for wagers that have a positive expected value.

This is absolutely correct as, strictly speaking, you should

only ever make bets where positive expected value exists. Value

is, of course, subjective in sports betting terms, as different

people will have different views on the probability of any

particular wager winning. However, the point is that you

shouldn’t place a wager if the odds aren’t high enough to

compensate for the risk of it losing.

The Kelly Criterion will help you avoid doing that. The

formula will return a negative for a proposed wager where

there’s no positive expected value, even if you think the wager

has a good chance of winning. Obviously you can’t bet a negative

percentage of your bankroll, so the formula is effectively

telling you **not to make the bet**. We’ll use another example to

illustrate this.

For this example, we’ll assume that you’re looking to bet on

an upcoming tennis match between Rafa Nadal and Andy Murray.

Your preferred bookmaker is offering the following odds.

Match Result

2.60

4.50

You believe that there’s a 65% chance (0.65 probability) of

Murray winning, so you decide to place a wager on him and use

the Kelly Criterion formula to calculate your stake. The

required calculation would be as follows.

As you can see, the formula has returned a negative value.

This means that you shouldn’t place the wager, as there’s no

positive expected value. Despite it having a good chance of

success, the odds aren’t high enough to justify risking money on

it.

## The Kelly Criterion: Advantages & Disadvantages

We can certainly see why the Kelly Criterion betting

strategy is so popular. It clearly makes sense to stake

higher amounts, relative to your bankroll, on good value wagers.

Any technique that can help you to do that must have some merit.

This strategy certainly does some have some advantages, although

it’s not without its flaws either.

### Advantages

One advantage of the strategy is simply that it’s a

relatively straightforward way to decide how much to bet.

Although applying the Kelly Criterion to **calculate the size of
your stakes** does take some getting used to, it’s not actually

that difficult once you’ve familiarized yourself with the

formula and how to use it. It’s really just a matter of putting

the relevant figures into the formula and then doing some fairly

easy mathematical equations.

The Kelly Criterion also takes the size of your bankroll into

consideration, which is another advantage. With that being said,

**any staking plan** you choose to use should be based primarily on

the amount of money you have to bet with. This is a fundamental

principle of bankroll management. What this particular strategy

does that most other staking plans don’t, however, is the

application of the theoretical value of wagers.

In fact, this is probably the biggest advantage of the Kelly

Criterion. It’s certainly the main reason for using it in the

eyes of many bettors, as it’s essentially what enables them to

get the **right balance** between growing their bankroll and

protecting it. Staking more when the theoretical value is high

and staking less when the theoretical value is low, should

maximize profits in the long run while reducing the chance of

going bust.

The final advantage to mention is that the Kelly Criterion

also helps to prevent the placing of wagers where positive

expected value doesn’t exist. It’s not always immediately

obvious when a wager is mathematically a bad decision,

especially when the probability of it winning is greater than

the probability of it losing. As we demonstrated earlier,

though, the formula will return a negative when there’s no

positive expected value. This serves as a useful warning to

avoid such wagers.

### Disadvantages

There are two main disadvantages of the Kelly Criterion. The

first one is something that we’ve already alluded to; it only

really serves a purpose when you’re able to accurately work out

the probabilities of any proposed wagers. If you can’t do that

reasonably well, then **the whole concept breaks down**. You’ll end

up betting the wrong amounts which will result in you either

losing your bankroll too quickly or hindering its potential

growth. The strategy does nothing to help you find profitable

betting opportunities, which is disappointing.

The second disadvantage of the strategy is that it could be

considered overly aggressive. In the example we used earlier,

the formula suggested staking an amount equal to 10% of your

bankroll. This is a very high percentage to risk under any

circumstances. You rarely, if ever, want to commit more than 5%

of your bankroll to a single wager and many bettors will never

go above 2%.

It’s possible to overcome this disadvantage though, by simply

taking a **more cautious approach** and reducing your stakes below

what the formula recommends. A lot of bettors use what is known

as a fractional Kelly strategy, where they bet a fixed fraction

of the suggested stake. This can be any fraction, but half is

common.

Using a fractional Kelly strategy doesn’t overcome the main

disadvantage though. No matter how much you adjust the formula,

it still won’t be able to tell you what selections you should

make on your betting slips.

## The Kelly Criterion: Our View

When it comes to what bettors and betting experts think about

the Kelly Criterion, their views seem to be split from one

extreme to the other. Many people firmly believe that the

strategy is extremely useful for calculating the optimal stakes

to place, while others believe it serves very little purpose at

all. Some even consider it to be completely useless.

We are among those who see both sides of the argument. It

clearly makes a lot of sense to stake more money on good value

wagers and the Kelly Criterion can help bettors to do this with

some degree of regularity. It’s not some magic system that will

guarantee consistent profits though. Although it’s based on

sound logic and reasoning, it still requires the ability to

**find
an edge and identify value bets**.

In our view, the Kelly Criterion has limited use as a betting

strategy. It doesn’t actually help improve your overall chances

of winning money, which is what a good betting strategy should

do. We therefore wouldn’t actively encourage anyone to use it.

However, we wouldn’t talk anyone out of using it either. We

strongly recommend using a staking plan and

practicing good

bankroll management when betting on sports: the Kelly Criterion

is a viable option for this. It’s up for debate whether it’s any

better than other methods that can be used in its place.