A Kelly-sized bet is the optimal amount to wager based on the Kelly Criterion,
a mathematical formula developed by John Kelly in 1956. It calculates the ideal bet size that
maximizes your long-term bankroll growth while minimizing the risk of ruin.
How it works:
The Kelly Criterion considers three factors:
- Your bankroll - Total funds available for betting
- Win probability - Your estimated chance of winning
- Odds - The payout you'll receive if you win
The formula outputs a percentage of your bankroll to bet. For example, if Kelly says 10%,
you should bet $100 on a $1,000 bankroll.
Why use it?
- ✓ Optimal growth - Bets the maximum amount that still protects your bankroll
- ✓ Risk management - Prevents overbetting, which can lead to bankruptcy
- ✓ Mathematical edge - Only recommends betting when you have positive expected value
Important:
Most professional bettors use Fractional Kelly (Half Kelly or Quarter Kelly)
instead of Full Kelly. This trades some growth potential for significantly lower volatility
and reduced risk of ruin due to probability estimation errors.
Bottom line: Kelly betting helps you size bets scientifically rather than
emotionally, ensuring sustainable long-term growth.
