Here is a great piece from the guys at the Football Advisor.
BETTING MASTERCLASS – THE COMPLETE GUIDE TO THE KELLY CRITERION MODEL
WHAT IS KELLY CRITERION & HOW TO USE IT
There are many criteria that sports bettors look for when making their selections, but there is one criterion our there that has the potential to be more profitable than the rest.
The “Kelly” Criterion is a mathematical equation that helps people determine the ideal risk amount over a series of wagers. It not only helps you manage your bankroll management (an under-rated skill that any serious gambler possesses), but it does so in a way that makes bets as profitable as possible. Sound interesting? Read on…
KELLY CRITERION FORMULA
While most people don't think that maths is the pathway to long-term profits in sports betting, the Kelly Criterion – in conjunction with the need for as much data as possible for each match – proves the undoubtable value of maths when employing a betting strategy.
Here is the formula for the Kelly Criterion, along with an explanation of each variable:
f represents the percentage of your bankroll to risk on your next wager, b represents the odds of the next match you are betting on, p represents the win probability of the team or other market you are wagering on, and q is the probability of losing your wager.
Stay with us, it gets clearer…
Of variable p, there is some room for interpretation depending on the methodology you want to use to determine win probability. If you prefer to use recent form, you can take a team's number of wins in a recent stretch of games to determine that probability.
If you want to dig deeper and evaluate a team's win percentage in certain weather conditions, or against certain teams, that is an option too. While none of those methods are perfect, they can be used in a granular fashion to give yourself the best chance of winning. Conversely, variable q is simply the inverse of variable p, and can be calculated by subtracting the value of p from 1.
BENEFITS OF THE KELLY CRITERION
The Kelly Criterion's biggest benefit is that it takes the subjectivity out of sports betting. While it is tempting to try to run up a big bankroll simply by knowing about the sports and teams that you are wagering on, that strategy fails to take into account important factors such as bankroll management. The Kelly Criterion allows bettors to use their knowledge in conjunction with a proven money management system, alleviating the biggest challenge for most bettors.
Another huge benefit to the Kelly Criterion is the simplicity of it once you've taken a bit of time to understand the model.
Sports betting systems can feel intimidating, and are often complicated enough to serve as a high barrier to entry for people who could otherwise benefit from them. With just four variables to sort out, the Kelly Criterion offers the potential for long-term success without all of the confusion that normally holds non-mathematicians back.
Of course, it is worth noting that different betting strategies work for different people depending on their ability to handicap matches and remain disciplined when it comes to the money management system involved. To quantify your performance with any betting system, it is smart to chart your picks and keep track of the amounts won and lost in each wager, to stay informed on how each system is working for you.
So that's the Kelly Criterion in a nutshell. If you have any questions around this model, drop them into the comments section below this post and one of us will get back to you as soon as we can. Good luck, though you don't really need.
I hope you found that useful :-)
Information courtesy of the Football Advisor.
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The Kelly Criterion Model