Kelly Criterion Calculator

Question 1

What is the Kelly Criterion and how does it work?

Answer

The Kelly Criterion is a mathematical formula that determines the optimal percentage of your bankroll to bet based on your edge and the odds offered. It maximizes long-term growth while minimizing the risk of ruin. The formula is: Kelly % = (bp - q) / b, where b = odds - 1, p = probability of winning, and q = probability of losing (1 - p).

Question 2

How do I calculate my edge for Kelly Criterion?

Answer

Your edge is the difference between your estimated win probability and the implied probability from the odds. Use our No-Vig Calculator to find fair market odds, then compare to your assessment. Example: If you think a team has 55% chance to win but odds imply 50%, your edge is 5%. Only use Kelly when you have a positive edge (your probability greater than implied probability).

Question 3

What is the difference between Full Kelly and Fractional Kelly?

Answer

Full Kelly uses the exact percentage calculated by the formula, maximizing growth but with higher volatility. Fractional Kelly uses a portion (e.g., 1/4 Kelly = 25% of the calculated percentage), reducing volatility and risk while still providing growth. Most professional bettors use 1/4 to 1/2 Kelly for more stable bankroll growth.

Question 4

How much bankroll do I need to use Kelly Criterion?

Answer

Kelly Criterion works best with larger bankrolls ($5,000+) because it requires significant capital to handle the recommended bet sizes. With smaller bankrolls, Kelly percentages may suggest bets that are too large relative to your total capital. Consider fractional Kelly or minimum bet sizes for smaller bankrolls.

Question 5

What are the risks of using Kelly Criterion?

Answer

Key risks include: overestimating your edge, high volatility with full Kelly, psychological challenges with large bet sizes, and the need for accurate probability estimates. Kelly assumes you can accurately assess true probabilities, which is difficult. Most bettors use fractional Kelly to reduce these risks.

Question 6

When should I not use Kelly Criterion?

Answer

Avoid Kelly when: you have negative expected value bets, your bankroll is too small for recommended bet sizes, you cannot accurately estimate win probabilities, or you prefer more conservative betting strategies. Kelly is most effective for experienced bettors with proven edges and sufficient bankroll.

Kelly Criterion Calculator

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Kelly Criterion FAQ

Understanding Kelly