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The Kelly Criterion is a formula developed by John L. Kelly Jr., a researcher at Bell Labs, in the 1950s. The formula was initially developed to help investors determine the optimal amount of money to allocate to a particular investment. However, it has since been applied to various fields, including sports betting.
The Kelly Criterion takes into account the probability of a bet winning and the odds offered by the bookmaker.
The formula is as follows:
For example, let’s say you want to bet on a football game where the odds offered by the bookmaker are 2.00 (or even money). You believe that there is a 60% chance of your bet winning. Using the Kelly Criterion formula, the optimal fraction of your bankroll to bet would be:
The Kelly Criterion is a popular betting strategy because it allows bettors to maximize their returns while minimizing their risk. By using the Kelly Criterion, bettors can determine the optimal amount of money to wager on a particular bet based on their perceived edge and the odds offered by the bookmaker.
For example, let’s say you have a bankroll of £1,000 and you want to bet on five different football games. Without using the Kelly Criterion, you might bet £200 on each game, regardless of the perceived edge or the odds offered by the bookmaker. However, by using the Kelly Criterion, you can allocate your bankroll more efficiently and potentially increase your returns.
To estimate the probability of a bet winning, you need to do research and analysis on various factors that can influence the outcome of a football game. These factors may include:
Maximizes Returns.
The Kelly Criterion helps bettors maximize their returns by allocating their bankroll more efficiently. By betting the optimal fraction of their bankroll on each bet, bettors can potentially increase their returns over the long term.
Minimizes Risk.
The Kelly Criterion also helps bettors minimize their risk by taking into account the probability of a bet winning and the odds offered by the bookmaker. By betting the optimal fraction of their bankroll on each bet, bettors can potentially reduce their losses over the long term.
Considers Your Edge.
The Kelly Criterion takes into account your perceived edge, which is your opinion on the likelihood of a particular outcome. By considering your edge, the Kelly Criterion helps you bet more confidently and potentially increase your returns.
Difficult to Determine Probabilities.
One of the biggest challenges of using the Kelly Criterion in football betting is determining the probabilities of a bet winning. Football games can be unpredictable, and there are several factors that can influence the outcome of a game.
Assumes Accurate Edge.
The Kelly Criterion assumes that your perceived edge is accurate. If your edge is inaccurate, the Kelly Criterion may not be an effective betting strategy.
Ignores External Factors.
The Kelly Criterion only takes into account the probability of a bet winning and the odds offered by the bookmaker. It ignores external factors such as injuries, weather conditions, and player suspensions, which can also influence the outcome of a game.