The Kelly Criteria
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by: JohnJ.Stockwell
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Word Count: 545
The Martingale and Row of Numbers systems of betting use high levels of progression. Here as long as you're winning, you're on a roll, but when you lose you double the size of your previous bet and you could become penniless in no time.
But there's another system, the Kelly Criteria, where the risk of being totally ruined is minimal or not at all. The size of your bet or funds decides the stakes. The progression increases when you are on a winning streak and goes down or decreases when you are losing.
When you use the Kelly Criteria, the punter is expected to be better than the bookmaker or at least be even with him. The Kelly Criteria says that you should have all the advantages on your side. You wouldn't want to bet on the home team if they didn't have at least a 50% chance and, say for e.g., if the home team has odds=2.0.
With the Kelly Criteria, either you make money or maximize your advantage by knowing the precondition on every game you pick, or you lose your money by overestimating the probabilities. You should have an edge.
Size of your Fund:
To start with you should have at least 10-15 times more money than your single bet amount. And this means you should have enough money and more capital to cover your losses. The only advantage in the Kelly Criteria is that it tells you what fraction of your bankroll you should commit to.
Length of the Project:
But you should have a time limit and tell yourself to quit when you have reached your betting goal. Or start fresh once you've reached your previous goal. At least you get to enjoy the money you have earned while giving you self the necessary experience and the moral fiber to quit while you're ahead.
If you've not set a timef rame or a goal, the bookie gets to enjoy your money as long as it's with him. Are you earning for the bookie or do you want to use the money as you please? So, it's important to reset your fund when it reaches 100% payoff.
You would be wise in resetting your fund to make your earnings work for you and deciding when to reset your fund.
Conclusion:
The best thing going for the Kelly Criteria is that you'll make money fast or minimize your loss at a very slow rate. This advantage is due to the fact that your next bet will be just a percentage of your optimum capital. If your capital is low, your next bet will also be low.
If your average stake is 10% of your total funds or capital, then you stand to lose 6 times in a row and will still have almost 48% of your funds left (take 0.9 and multiply with itself 6 times).
The Kelly Criteria is dependent on the risk you run. You can make money by having a decent required margin, about 5% on each game. If you are able to predict right, guess the probabilities right, your stakes increase. If you lose then the stakes decrease.
Because of this, your account may not show great activity. The Kelly Criteria benefits those punters who don't just bet for money but for some creative satisfaction like when a prediction comes true.
About the Author
A PhD in statistics has devised a system to win at NBA and MLB betting a staggering 97% of the time. Learn all about it at http://sportsbettinghint.com.
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