The Kelly Calculator or Kelly Critereon Calculator can help a sports bettor decide how much of their bankroll to risk based on the odds and an understanding of their predicted winning percentage. Originally applied to the stock market, it quickly moved to horse betting and found it’s most successful use in poker. It is an aggressive betting strategy which is intended to gain maximum profit based on the information at hand. There is a huge drawback that you must understand and be aware of before using Kelly Criterion in your betting. You can read about the math and proof of the theorem, but that is more for the academic types. The catch with Kelly is always the Win Percentage. In sports betting, as with investing, your personal win percentage at different odds is virtually impossible to get accurate. If you don’t get it accurate the volatility in your betting will evaporate your bankroll. The good news is that if you are a strict -110 bettor, then, over time, Kelly Criterion can give you the ideal betting outcome…but can’t ever assure you profit. Most bettors apply a factor to the Kelly calculator (the Kelly multiplier) to take advantage of the theories betting advice, while limiting risk. This means a much less agressive potential growth but it keeps the volatility down. 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:
How the Kelly Calculator works
First 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 and that is a pretty great investment if you can get it. Next you need to decide the Kelly Multiplier you are going to use. No more than 0.5 is recommended if you are looking to be a long term bettor.
Now for the math. Get out your protractor. Let’s take the basic case of -110 odds and a winning percentage of 55% with 0.5 Kelly multiplier (half Kelly):
1) Convert Odds to Decimal
Use the Odds Calculator or:
Decimal Odds = (-100 / Odds) + 1)
1.9091 = (-100 / -110) + 1)
2) Plug the value into this (long, but easy) equation
Kelly Fraction Percent = ((Decimal Odds-1) * Winning Percentage (as a decimal) – (1- Winning Percentage)) / (Decimal Odds-1) * Kelly Multiplier
Damn. Ridiculous, I know:
Kelly Fraction Percent = (0.9091 * .55 – (1 -.55)) / 0.9091 * 0.5
Kelly Fraction Percent = 0.0275 = 2.75%
If your bankroll is $1,000 then you are advised to wager $27.50. Good luck!