The Kelly criterion works out the share of your bankroll that grows it fastest, based on the odds and your win chance. With no edge, it says bet nothing.
The formula is (b × p − q) ÷ b, where b is the decimal odds minus 1, p your win chance and q the chance of losing.
Full Kelly is aggressive and assumes your win chance is exactly right. Most bettors use half or quarter Kelly.
How it works
The Kelly criterion answers a specific question: given an edge, what share of my bankroll should I bet to grow it as fast as possible over time? It was developed by John Kelly in the 1950s and has been used by bettors and investors since.
Two features make it appealing. It bets more when the edge is bigger, and it bets nothing when there's no edge. Because stakes are a share of the current bankroll, they shrink automatically during a drawdown.
The big weakness is that it relies on knowing your true win chance. Overestimate it, even slightly, and Kelly tells you to bet far too much. That's why most bettors use a fraction:
- Half Kelly keeps most of the growth with much smaller swings.
- Quarter Kelly is popular with bettors who aren't sure how accurate their estimates are.
Kelly also doesn't account for betting several games at once. If you have five bets running together, staking full Kelly on each can expose far more of your bankroll than intended.
The Kelly calculator shows full, half and quarter stakes for any bet.
Examples
- Example 1
+110 with a 52% win chance: full Kelly is 8.4% of your bankroll, quarter Kelly 2.1%.
- Example 2
-110 with a 55% win chance: full Kelly is 5.5% of bankroll. With $2,000 that's $110 full Kelly, $55 half Kelly or $27.50 quarter Kelly.
- Example 3
+200 with a 36% win chance: full Kelly is (2 × 0.36 − 0.64) ÷ 2 = 4% of bankroll.
- Example 4
You think a -110 bet wins 55%, but it really wins 52%. The true Kelly stake is negative, meaning no bet at all, yet your estimate told you to stake 5.5%. That's why fractional Kelly is safer.
Common questions
Do professional bettors use the Kelly criterion?
Many use it as a guide, but most bet a fraction of full Kelly, often half or a quarter, because their win chance estimates are never perfect.
What happens if I bet more than Kelly?
Betting more than full Kelly increases risk without increasing long-term growth. At around twice the Kelly stake, expected growth drops to roughly zero, even with a real edge.