What is the Kelly Criterion?
Kelly Criterion is a mathematical formulathat determines the exact percentage to stake based on your edge.
Formula:
Stake % = (B × P - 1) / (B - 1)
Where:
- B = Decimal odds - 1 (what you win per 1 unit)
- P = Your estimated probability (decimal, e.g., 0.60 for 60%)
- 1 = your unit stake
Practical Example
Match: PSG vs Barça
- PSG win odds: 2.10
- You estimate PSG has 60%chance
Calculation:
- B = 2.10 - 1 = 1.10
- P = 0.60
- Stake % = (1.10 × 0.60 - 1) / (1.10 - 1) = -3.4%
❌ Negative stake — no value. Odds 2.10 not high enough for 60%.
Another example with odds 2.50:
- B = 1.50, P = 0.60
- Stake % = (1.50 × 0.60 - 1) / 0.50 = 20%
✅ 20% of bankroll is your stake size. Risky — you need high confidence.
Why Kelly is Advanced
1. Needs precise estimates— overestimating 60% when true is 52% makes you lose2. High variance— full Kelly can cause big swings3. Doesnt account for personal risk tolerance
Solution: Fractional Kelly
Use 25-50% Kellyinstead of 100%:- More stable
- Lower variance
- 2-4× lower swings
Recommendations
❌ Do NOT use full Kelly if youre a beginner
✅ Start with Half Kelly (50%)— safer✅ Never go below 5% bankroll per bet
✅ Only use Kelly when you have a proven model