The Kelly Criteria: Top Online Sportsbook Betting Advice

Written by SportsbookKS
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No, It`s Not A Spy Movie. The Kelly Criteria Tells You What Your Optimum Size Of Top Online Sportsbook Bet Is.
As smart gamblers we are obviously trying to only get money on when we have an advantage. But just how much of your bankroll should you bet?

Risking it all every time is a pretty sure way to go broke, but at the same time, there`s only a limited number of opportunities to exploit.
It`s pretty easy to see that the higher your edge, the more you should be willing to bet.

Having rules of thumb can work pretty well. For example you could bet $100 on games you felt were way out of wack, $50 if you thought the lines were a little off, and $20 on hunches that had little evidence to back them up.

However, there is a surefire mathematical way of ensuring you are getting the best trade off betweem risk and reward. It`s called the Kelly Criteria (or Kelly`s Criteria).

John L. Kelly invented it all the way back in 1956, and it`s been used by smart gamblers ever since.



Basically, when you apply the Kelly criteria you`re assuming that your estimation of the game`s true probabilities is more accurate than the estimation reflected by the bookmaker`s odds.

This might sound frightening, but all it really means is that you think that their line is wrong (and know roughly by how much).

Converting money line to probabilities isn`t too bad once you know how to. I first convert them to decimal odds (the kind where 2.0 is even money) by doing the following.

For underdogs, simply divide the price (+240 for example) by 100 and add 1. Easy.

It`s a little tougher for favourites. For favourites, divide 100 by the favourite`s price (after dropping the minus sign) and add one. For example if the price is -120, you simply 100/120 +1 (in this case the decimal odds are 1.83.

Converting decimal odds to probabilities is easy. You just divide 1 by the odds (for example, a decimal of 2.00 = a probability of 50%)

Converting point spreads to probabilities is tricky, and probably best done on a sport by sport basis. There`s almost certainly a good way to do it, but I don`t know it yet I`m afraid.

So, armed with your probabilities, it`s time to work the out Kelly Fraction. The formula is pretty simple:

(odds*estimation)-1 / (odds-1)

Odds here are in terms of X to 1 (to convert moneylines to odds *) and your percentage estimation is expressed in decimal terms (25% = 0.25).

Multiply your bankroll by the number you come up with (it should be between 0 and 1 if you have an edge and have done things right) and you have the amount you should bet.

I always round the number off a little ($234.56 becomes $235 or even $200) because sportbooks do not like sharp players, and funny sized bets are a giveawy that you are either arbitraging, or Kelly betting, and both of these are habits of winners.

Playing the true Kelly fraction on a sportsbet though is putting a lot of faith in your estimations. It can also lead to some gut-wrenching swings. A lot of sportsbettors play half-Kelly (it should be obvious what that is), or use Kelly fractions to determine how you should allocate your betting budget for the week.

Basically, you use the ratio of the Kelly fractions of the games you are interested in to determine the proportion of the week`s betting dollars you should put on each game you are planning on betting.

OK, maybe an example will clear things up. You have decided to bet $100 this week and have three games you are interested in. You run the Kelly calculations and come up with 5% 3% and 2%. These total 10%, but rather than bet 10% of your bankroll, you bet 5/10 on the first game, 3/10 on the second, and 2/10 on the third.

Hope that helped - it`s much easier to apply to games where the probabilities are easier to determine for sure, but I think it has a lot of value for sportsbettors as well.

 

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