Kellye`s criterion
2008-02-12 08:16:09
People playing in the bookmaker`s betting should be aware, that only an effective typing is not enough to make a profit. Equally important issues are: having a game plan and skillful capital management. Unfortunately in most cases the players don`t take them into consideration, what in most cases, in the long term perspective, cause they are doomed to failure.
One of the ways of the effective betting is determining a betting stake amount upon the Kellye`s criterion, which says, if the player is able to predict correctly the probability of some sport event`s result to occur, he will be also able to calculate the optimal stake, which he should bet on that particular event.
Kellye`s formula allows you to optimize the stake`s amount, however it proves correct only, when the player is able to individually determine the probability of some result to occur, with an insignificant margin of error, and also to find so called value-bets.
Example
We will be dealing with two kinds of probability. Those resulting from the bookmaker`s odds and those estimated by us.
If the bookmaker is offering the odd 1.85 for a victory of the team A, we assume, that according to him the probability is 1/1.85, that is 54% (we don`t take the bookmaker`s profit margin into consideration). Let`s imagine a situation, where the best opponent team`s player was injured and will not be able to play in the next match. We estimate the probability for the Team A to win for let`s say 55%. In this case the odd 1.85 is overestimated, what makes this bet a value-bet.
We will calculate the optimal stake according to the Kellye`s criterion
Stake = (C x Ovl.) / (C – 1), where
C – capital intended for betting
O – bookmaker`s odd
P – subjectively estimated the result appearance probability
Ovl. – Overlay
The overlay is an advantage, which the player has over the bookmaker, we calculate it according to the formula:
Ovl. = P x O - 1
If we will combine two formulas together, we will get:
Stake = [C x (P x O – 1 )] / (O – 1)
Let`s assume the following foundations:
1. The capital is €1000.
2. We are betting on the team`s A victory on the odd 1.85
3. The probability for the team A to win is estimated as 55%.
We calculate the optimal stake:
Stake = [1000 x (55% x 1.85 – 1)] / (1.85 – 1) = €20.56
This means, that we have to stake €20.56 for the team`s A victory. Let`s see what will happen if the “P” will be estimated as 57%.
Stake = [1000 x (57% x 1.85 – 1)] / (1.85 – 1) = €64.12
The stake has risen significantly, so the more we will increase the probability, the higher will be the stake.
To increase the capital`s safety we can divide the stake by 2 or by 4 and bet using the systems Half Kelly or Quarter Kelly. Doing so we decrease the risk of losing pretty big part of our capital as a result of a series of the unfavourable matches results, what can happen independently of the quality of the estimated probability. However it`s difficult to lose a whole capital, because every time the player is loosing, the next stake is lower. But if he will win, he can decide whether the profit should be added to the capital and to increase the stake at the next games, or the funds should be used for something else.
Notice!
If a player has tendency to overestimate the probability of the result to occur, for e.g. if we will determine the chance for the team A to win as 60%, when in fact it`s 53%, it will be making losses. In case when the player will underestimate the probability for a result to occur, for e.g. the chances for the tam A to win are estimated as 53%, when in fact it’s 60%, he will be achieving profits, however not as high, as when the player would be playing with the flat stake.
Because playing the Kellye`s system is strictly connected with finding value-bets, below you will find a tip how you can find them.
Of course the bookmakers, at all costs, are trying to avoid the value-bets, however they are not able to analyze precisely all sport events, that they have in their offer and the odds-makers are also humans and they make mistakes like everybody else. That is why the best way to find a value-bet is checking the odds from the different bookmakers and searching them with a wide range. The range in the odds means, that different bookmakers have different views about the matches results. In that case, at least one of them is wrong. All we have to do is to find out which one.
To find a bet with a wide range we have to check all different bookmaker`s web pages, but much faster and more comfortable way is to use the odds comparer, which you can find by clicking here.
There is one even faster way. If you would like to have the surebets delivered straight away, you can find them here.
If you will find an odd, which you think is a value-bet, analyze it carefully. If the odd is 2.0, the chances for the result to occur have to be higher than 50%.
