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The Kelly criterion in sports betting

The Kelly Criterion is one of the most common concepts in sports betting. Someone calls it simply the optimal way to manage a bankroll, but there are also those who criticize this method - in our material, we will try to dot the i's in this matter.

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What is the Kelly criterion?

American financial expert John Kelly developed his criterion back in 1956, working at the AT&T Bell Laboratory. Later, the Kelly criterion became more and more popular in the betting industry and in the financial sector, and now it is widely used by both bettors and traders, who often call it simply ""Kelly"".

In general, the Kelly criterion is a formula for calculating the proportion of available funds that should be risked to maximize the potential return on a bet or investment. In other words, it considers how much money needs to be wagered, what is the probability that the bet will win and what is the probability that it will lose, and whether bets can be placed based on this.

While this is just one of many tried and tested betting methods, the Kelly Criterion is considered the best because it protects your bankroll and at the same time ensures that you bet in proportion to the positive expected value that you have over the market.

How does the Kelly criterion work?

Betting strategies can be very different - from simple methods with flat or fixed rates (for example, betting the same amount each time) to sequential methods such as the Martingale method or catch-up (doubling the bet after a loss) and Fibonacci (moving up by one step in the sequence of numbers after a loss and down two after a victory).

However, the Kelly criterion differs from all the common betting methods listed above in that it is proportional. The amount you bet using the Kelly Criterion is always a proportionate share of your bankroll in relation to the edge you own.

The main principles of the Kelly criterion are that if you lose, your bankroll will never run out, and if you win, your funds will multiply exponentially. If you have a series of losses, the recommended bet amount will decrease to match your bankroll. Conversely, if your bets are profitable and increase your bankroll, your further bets will also increase.