The Kelly Calculator (or Kelly Criterion Calculator) can help a sports bettor decide how much of their bankroll to risk on a wager. The amount recommended is based on the odds offered by the sportsbook as well as an understanding of your predicted winning percentage.
Originally applied to the stock market, the Kelly Calculator quickly moved to horse betting and found its most successful use in poker. But this aggressive betting strategy can be used with any form of wagering to maximize profit based on the information at hand.
Kelly Calculator
Try out the Kelly Criterion Calculator below, but pay careful attention to sure things (like -200 odds or above) because that is where Kelly can get you in trouble.
Kelly betting or proportional betting is an application of information theory to investing and gambling. Its discoverer was John Larry Kelly, Jr. Part of Kelly's insight was to have the gambler maximize the expectation of the logarithm of his capital, rather than the expected profit from each bet. The fractional Kelly betting input is a way to change how aggressive or conservative you are with your wagering (1 being the standard and moving towards 0 the. Kelly Calculator is a guideline for sports betting. Find out how much you should stake based on the odds & projected winning percentage.
What Is A Kelly Criterion Calculator?
A Kelly Criterion Calculator helps you decide what percentage of your bankroll you should wager on a sports bet. So you first need to decide your bankroll size and the length of time you'll be using the Kelly method.
The easiest is to say you'll be using the Kelly Criterion for one year or the length of a sports season. A timeframe is important because the goal of the Kelly Calculator is to profit over a given period. Once that time has elapsed, you can see your profit percentage, then adjust your Kelly Criterion approach accordingly.
You'll also want a good idea of your win percentage. But if you're exclusively a -110 bettor, the minimum win percentage is 53% for the Kelly Calculator to recommend betting any amount.
If your win percentage is lower than 53% on -110 wagers but you still want to use the Kelly Criterion, you'll need to look for bets with longer odds (or bets that you think would have a higher win percentage).
How To Use A Kelly Criterion Calculator To Place A Sports Bet
To use the Kelly Calculator for sports betting, you need a few pieces of information. The odds, of course, but then you also need your winning percentage. Unfortunately, this is where some go wrong.
You need the winning percentage of the specific odds you are betting on. If you put in your overall winning percentage, you are in trouble.
Imagine that you are a 55% winning sports bettor at -110 odds. Good for you! But if you put that 55% in the Kelly calculator on a +150 dog, Kelly will advise you a ridiculous 25% of your bankroll because it is looking to maximize your profit. If you put that much into a single bet, you risk losing an enormous amount of your bankroll.
Instead, you want to be as conservative as possible. If your win percentage is already 45% or lower, then just use that. But if it's higher than 50%, you want to be realistic when you're betting on odds longer than -110.
Kelly Multiplier
You also need to decide the Kelly Multiplier you're going to use. Basically, this is how much of the Kelly Calculator recommended amount you want to wager. While the calculator is automatically set at 1, we recommend adjusting it to no more than 0.5 for long-term betting.
Most bettors apply a factor to the Kelly calculator (the Kelly multiplier) to take advantage of the theory's betting advice while limiting risk. This means a much less aggressive potential growth while keeping the volatility down by a significantly lower margin.
You Can Never Guarantee A Profit
There is a huge drawback that you must understand and be aware of before using Kelly Criterion in your betting. The catch is always the win percentage. In sports betting, as with investing, your personal win percentage at different odds is virtually impossible to get accurate. And if it's not accurate, the volatility in your betting will evaporate your bankroll.
So approach this knowing that you can never assure that you'll make a profit.
But if you are a strict -110 bettor, then, over time, Kelly Criterion can help give you the ideal betting outcome.
Looking for other calculators to use when sports betting? Check out:
How The Kelly Criterion Calculator Math Works
While you can simply enter the information into the Gaming Today online Kelly Calculator, it can be helpful to know how the math works. Here's a step-by-step guide.
Step 1: Convert Odds To Decimal
The easiest way to convert American odds to Decimal would be to use the Odds Calculator. But it can also be done manually.
To convert positive odds, the equation is:
(Odds divided by 100) + 1
To convert negative odds, the equation is:
(100 divided by odds) + 1
Step 2: Use The Kelly Criterion Formula
This long but easy formula is how the Kelly Calculator creates its results:
((Decimal Odds – 1) * Decimal Winning Percentage – (1 – Winning Percentage)) / (Decimal Odds – 1) * Kelly Multiplier
Kelly Betting Calculator
Kelly Criterion Example
Let's take the basic case of -110 odds and a winning percentage of 55% with 0.5 Kelly multiplier, which is also known as a half Kelly. While it's not the simplest situation, it's one of the most likely scenarios when utilizing this betting strategy.
So let's add a bit of simplicity and say that your bankroll is $1,000. That way, we can do the math and see exactly how much you would wager in this scenario.
Step 1: Converting -110 American Odds To Decimal Odds
Because it's a negative number, you'll use the equation (100 divided by odds) + 1 = decimal odds. 100 divided by 110 is 0.9091. Plus one, and you get 1.9091 for the decimal odds. Here it is another way:
(100/110) + 1 = 1.9091
Step 2: Plugging Decimal Odds Into The Kelly Criterion Formula
With 1.9091 decimal odds, a 55% winning percentage as a decimal (0.55), and a half Kelly (0.5), the equation would look like this:
((1.9091 – 1) * 0.55 – (1 – 0.55)) / (1.9091 – 1) * 0.5 = 0.0275 (2.75%)
If we do the math in the parentheticals first, it would be:
(0.9091 * 0.55 – 0.45) / 0.9091 * 0.5 = 0.0275 (2.75%)
Broken down again:
Broken down again:
0.050005/0.9091 = 0.0550049499505 * 0.5 = 0.0275 (2.75%)
Using the Kelly Criterion, you should use 2.75% of your $1,000 bankroll, or $27.50. Good luck!
Bettors should always look for a mathematical edge rather than rely on their impulses. Learning how to use the Kelly Criterion, for example, is a great way for bettors to determine how much they should stake. Read on to find out.
Prior to placing a bet bettors should consider six important questions: who, what, when, where, why and how? But for this article, it is the how, as in how much to bet, we are interested in.
Popular staking method which suggests that stake should be proportional to the perceived edge.
Consider placing a bet on the English Premier League. We can adapt these questions accordingly:
- Who to bet on? Manchester United
- What to bet on? Top 4 finish
- When to bet on? Now
- Where to bet on? Pinnacle tend to offer the best odds
- Why to bet on? They seem to be under-priced
- How much? How much to bet on this outcome?
Kelly Betting Stock Market
Most articles focus on the first five questions, typically using mathematical or statistical justifications on answering ‘why' - such as the article on how to use Monte Carlo methods.
In making financial decisions, the key issue is not only finding the adequate financial products to invest in but also deciding how to subdivide one's portfolio. Similarly, an important question for a bettor, is how much to wager?
Many papers recommend using the Kelly Criterion or a derivative of it - such as my 2013 paper appearing in the The Journal of Gambling Business and Economics. In essence, the Kelly Criterion calculates the proportion of your own funds to bet on an outcome whose odds are higher than expected, so that your own funds grow exponentially.
B = the Decimal odds -1
P = the probability of success
Q = the probability of failure (i.e. 1-p)
Using a coin as an example of Kelly Criterion staking
For example, consider you are betting on a coin to land on heads at 2.00. However, the coin is biased and has a 52% chance of ending up on heads.
In this case:
P= 0.52
Q = 1-0.52 = 0.48
B = 2-1 = 1.
This works out at: (0.52x1 – 0.48) / 1 = 0.04
Therefore the Kelly Criterion would recommend you bet 4%. A positive percentage implies an edge in favour of your bankroll, so your funds grow exponentially. You can also test the criterion for different values in this online sheet by using the code below.
Kelly Betting Strategy
Ultimately the Kelly Criterion offers a distinct advantage over other staking methods such as Fibonacci and Arbitrage methods as there is a lower risk. However, it does require precise calculation of the likelihood of an event outcome, and discipline of this method will not provide explosive growth of your bankroll.
Keep up-to-date with more top-notch betting articles by following us on Twitter @PinnacleSports.
