The Kelly Criterion is a scientific approach to betting size, designed to help you grow your bankroll while managing risk. Used by pro gamblers, poker players, and Wall Street traders, it tells you how much to stake when you have an edge.
What is the Kelly Criterion?
The Kelly Criterion is a mathematical formula developed in the 1950s for maximizing the growth of your bankroll over time. In betting, it answers: How much of my bankroll should I stake, based on my odds and my own probability estimate?
Why Use the Kelly Criterion?
Maximises long-term growth of your bankroll
Protects you from going broke—even after a bad run
Prevents staking too much or too little when you have a real edge
Used by professional bettors, poker players, and investors
How Does it Work?
Estimate your true win probability (not just the bookie’s odds!)
Enter the odds you are being offered
Calculate the “Kelly %”—the fraction of your bankroll to bet
Kelly Formula: (bp - q) / b
Where: b = Decimal odds minus 1 (e.g. 5.00 odds is 4.00) p = Your probability estimate (as a decimal, e.g. 40% is 0.40) q = 1 - p
Example: Kelly in Action
Odds offered: 5.00 (4/1)
Your estimated chance: 30% (0.30)
Your bankroll: ÂŁ200
Kelly % = ((4 x 0.30) - 0.70) / 4 = (1.2 - 0.7) / 4 = 0.5 / 4 = 0.125 (12.5%)
You would stake ÂŁ25 (12.5% of ÂŁ200).
Tip: Many use “half Kelly” (in this case, £12.50) for lower risk and smoother growth.
Kelly Pros & Cons
Pros: Maximises profit, prevents ruin, removes emotion from staking
Cons: Needs a realistic edge—overestimating your skill or using it for poor value bets will hurt! Full Kelly can be “swingy”; many use half Kelly or less
Frequently Asked Questions
What if the Kelly % is zero or negative?
Don’t bet! The odds do not offer value on your numbers.
Is the Kelly system “safe”?
Kelly minimises risk of ruin, but big swings can still happen. Many pros use half or quarter Kelly.
Do I need to use my whole bankroll?
No, but use a consistent approach for tracking results.
Does Kelly guarantee profits?
No betting system guarantees profit—discipline, good estimates, and luck all play a part!