Kelly Criterion in Sports Betting: What it Is & How to Use It

The Kelly Criterion sports betting method is a mathematical formula used to work out how much you should bet when you believe the odds are in your favor. It adjusts your bet based on how strong your edge is. 

The idea is to grow your bankroll steadily over time by picking informed bet sizes, balancing profit and risk.

Ready to find out how to use the Kelly Criterion? Read on. 

What Is the Kelly Criterion?

The Kelly Criterion is a formula used for bankroll management. It helps you to determine how much money you should bet when you think your chances of winning are better than the odds suggest. Instead of guessing or betting randomly, it gives you a specific amount to bet through a formula to grow your money over time without risking too much.

For example, let’s imagine that you’re betting on a football game. The sportsbook odds give a team 40% odds of winning, but based on your research, you think the real chance is more like 50%. 

The Kelly Criterion helps you work out exactly how much to bet in that situation to make the most of your advantage without risking too much of your bankroll.

The Kelly Criterion is a mathematical approach to sports betting strategy. It helps you make smarter bets by adjusting your stake based on how strong your edge is. If the edge is slight, a smaller bet is recommended. If there’s no edge at all, it tells you not to bet.

The Kelly Criterion is designed to be used over the long run, not just for a single bet. Although the formula tells you how much to stake on one bet based on your perceived edge, you only really see results from applying it consistently over time. After each bet, your bankroll changes, so the next calculation adjusts based on your new balance.

How Does the Kelly Criterion Work?

Kelly Criterion sports betting works by comparing the odds you’re given to the odds you believe are accurate.

If your estimated chance of winning is higher than what the sportsbook’s odds suggest, the formula helps you figure out how much of your bankroll to bet. The goal is to make the most of your edge while protecting your money.

Let’s say the Philadelphia Eagles are playing the Green Bay Packers, and the sportsbook offers +200 odds on the Eagles to win.

We need to convert that into decimal odds to use the formula: +200 equals 3.00 in decimal format. That means the sportsbook implies a 33.3% chance of the Eagles winning. But based on your own research, you think that the Eagles have a 50% chance of winning.

In this case:

• B =  2.00 (3.00 - 1)

• P = 0.50

• Q = 0.50

Putting those numbers into the formula: (2.00 x 0.50 - 0.50) / 2.00 equals 0.25. That tells you to wager 25% of your bankroll, so on a $100 bankroll, you’d bet $25 on the Eagles.

Here’s another example to consider. Let’s say the Toronto Maple Leafs are facing the Tampa Bay Lightning, and the sportsbook is offering +150 odds on the Maple Leafs to win. That converts to 2.50 in decimal odds, which suggests they have a 40% chance of winning.

After looking into their recent performance, you believe the chances are closer to 48%.

In this case:

• B = 1.50 (2.50 - 1)

• P = 0.48

• Q = 0.52

Now using the formula: (1.50 x 0.48 - 0.52) / 1.50 equals 0.1333. That means you’d bet 13.33% of your bankroll on the Maple Leafs. 

Interestingly, the formula also tells you if you shouldn’t bet. This is the case if you wind up zero or a negative number. 

For example, if you thought the Leafs only had a 40% chance, which matches the odds, the calculation would result in zero. 

You don’t have the edge in that case, so the Kelly Criterion would recommend skipping the bet.

How to Use the Kelly Criterion in Sports Betting (Strategies/Tips)

When using the Kelly Criterion formula for sports betting, there are a few tips to keep in mind to make sure you’re applying it effectively. The formula itself is one part of it, but you get real value from it by understanding your edge, managing your bankroll, and staying consistent over time.

• Fractional Kelly: The bet sizes suggested by the Kelly Criterion can sometimes be a bit too aggressive for sports betting, especially if your edge is strong. If the recommended stake is too high or you aren’t comfortable with such a large bet, Fractional Kelly can be used, where you bet 1/2, 1/4, or even 1/8 of the full Kelly amount. By betting a smaller fraction, you trade off some potential profit for lower risk.

• Do Proper Research: Make sure that you’re confident that your chances are better than what the sportsbook is offering. You need to do proper research, like looking up team statistics, player injuries, recent history, weather conditions, and other relevant information. The more accurate your probability estimate is, the more reliable your Kelly calculation will be. Your edge is only as good as your probability estimate.

• Adjust for Your Bankroll Size: Your bankroll should change each time that you use Kelly Criterion betting. After each win or loss, your balance shifts, and so should your stake. When used correctly over a long series of bets, this approach helps you grow your bankroll steadily.

• Only Bet When the Result is Positive: The Kelly Criterion will tell you exactly when not to bet, which is just as important as knowing when to. If the calculation gives you a zero or negative number, it means the bet isn’t worth it and you should walk away. 

• Use it in Conjunction with Other Strategies: The Kelly Criterion should be used alongside proper research, good bankroll management, and smart betting judgment. It’s just one part of your overall approach to sports betting.

• Be Patient to See Profit: The Kelly Criterion is meant to be used over a long series of bets, slowly building up your profit. You won’t always see immediate results, but you get the most out of it by being consistent over time.

Pros & Cons of Using the Kelly Criterion in Sports Betting

Like any sports betting strategy, the Kelly Criterion has pros and cons. Before you decide to use it, make sure to consider these advantages and disadvantages.

Detailed Pros

• Maximizes Long-Term Profit: The Kelly Criterion is built to grow your bankroll over time. When you consistently find value in the odds and estimate your edge correctly, the strategy helps you make the most of your edge without risking too much.

• Avoids Overbetting: Because it is based on exactly your bankroll and edge, it naturally helps you avoid any risky bets that could drain your bankroll.

• Rational Strategy: You’re given a clear number based on a mathematical formula. It takes emotion out of the equation and is purely based on logic.

• Increases with Your Success: As your bankroll steadily grows, your bet sizes increase proportionately. You’re always betting on what you have, not just a fixed amount.

• Encourages Selectivity: If the formula tells you not to bet, it’s because the odds don’t offer enough value. So, you’re automatically avoiding any bets that aren’t worth the risk.

Detailed Cons

• Need to Be Right About Your Edge: If you overestimate, you could stake a lot more than you should. This part of the strategy is least forgiving, and it could go wrong if you make a bad call initially and overestimate your edge. 

• Can Recommend High Stakes: When you have a significant edge, it can suggest betting a high percentage of your bankroll, which can lead to big swings or be too risky for some.

• Not Suited for Casual Betting: It’s a long-term strategy that requires consistent tracking of your bankroll and staying disciplined. It’s also best suited to bettors who dedicate a lot of time to analysis. If you’re just casually betting, it might be more effort than it’s worth.

The Kelly Criterion Conclusion

The Kelly Criterion is a smart strategy if you’re a dedicated sports bettor looking to grow your bankroll strategically. It works best when you’re confident in your edge and willing to be consistent and disciplined. 

While it doesn’t guarantee quick profit, it does give your betting structure and helps avoid reckless bets. If this sounds like something that would help your sports betting bottom line, you should consider using the Kelly Criterion.