How Does the Kelly Staking Strategy Work in Betbarter Id?
If the goal of all punters is to maximize their bankroll growth, what is the ideal staking technique to help us reach this goal?
It’s a contentious issue, but Betbarter Id has come up with an answer “that stakes should be calculated using the Kelly Criterion.†Why? Because the Kelly Criterion attempts to compute the optimal stake for any value bet in order to maximize both that value and the growth of your betting bankroll. In other words, the Kelly Criterion considers both the amount of your advantage (i.e. the available value) and the size of your bankroll in order to minimize risk and maximize advantage
However, there are a number of obstacles when using this approach in the sector of sports investing.
What Exactly Is the Kelly Criterion?
Bookmakers close or severely limit accounts, and even the world’s largest betting exchange has found it necessary to implement a Premium Charge, implying that a number of people have the ability to consistently identify advantageous bets and the discipline to bet only, or perhaps mostly, when it is profitable for them to do so.
The Kelly Criterion and the Optimal Strategy
The criterion is only valid “when the investment or 'game' is played many times over, with the same probability of winning or losing each time, and the same payout ratio,” as John Larry Kelly Junior's original 1956 paper makes clear (you can read it here).
This is regrettable. In the realm of sports, no two events are ever identical. You know exactly what the chance is if you bet on red on the roulette wheel, but because the edge in casinos is in favor of the house, the Kelly Criterion won't help you here.
Kelly must have a favorable edge, a value opportunity, for it to work. If the edge is exactly zero, the Kelly Criterion recommends that no bet be placed, and if the edge is negative, no bet is put as well.
How Might the Kelly Criterion Help Sports with Unclear Probabilities?
To assist address this, consider a simple game in which the true chance is 50% but the reward surpasses this. You have a good bet, but it should be evident that betting the entire bank every time is not the greatest way to go about it. You have a very high possibility of going bankrupt.
The ultra-cautious technique of risking a small proportion of the bank each time is at the other end of the risk range. While the chances of your bank going bankrupt are currently very low, it will not grow quickly.
Kelly Criterion: Optimizing Your Sports Betting Edge's Stake
Clearly, the best strategy rests somewhere in the middle, and Kelly estimated that the fraction of the bank staked equals the amount of your edge. For example, if you have a 51% chance of winning and the price available is evens, you should bet your 2% edge (51% -49%), with 49% being the probability of losing. If you have a larger advantage, say 53% chance of winning, your stake should be 6% (53% – 47%).