Kelly Criterion
Definition
A mathematical formula that determines the optimal fraction of your bankroll to bet in order to maximise the long-term growth rate of your capital. The Kelly Criterion accounts for both the size of your edge and the uncertainty of the outcome. Betting more than the Kelly amount increases variance without increasing long-term returns.
Example
Your model estimates a home win at 60%. The bookmaker offers odds of 2.00 (50% implied probability). The Kelly formula: f* = (b × p − q) / b where b = 1 (net odds), p = 0.60, q = 0.40.
Result: f* = (1 × 0.60 − 0.40) / 1 = 20% of bankroll. In practice, most professionals apply fractional Kelly (e.g. 25–50% of the full Kelly amount) to reduce variance while preserving most of the growth advantage.
How CalibrSports Predicts This
We use a 5-tier fractional Kelly system mapped to model probability confidence levels. Higher-confidence predictions receive larger Kelly fractions; marginal-edge bets receive very small fractions. A daily exposure cap of 50% and a per-bet cap of 10% ensure drawdown risk remains controlled. Stake percentages shown on our picks page are the output of this calculation.
Key Facts
Formula
f* = (bp − q) / b
Tiers
5 (mapped to probability bands)
Daily exposure cap
50% of bankroll
Per-bet cap
10% of bankroll
Related Terms
Frequently Asked Questions
Why not bet full Kelly?
Full Kelly maximises theoretical growth but produces brutal short-term variance. A single losing streak can halve your bankroll. Fractional Kelly (typically 25–50% of full Kelly) delivers most of the long-term growth with significantly smoother equity curves.
What happens if my edge estimate is wrong?
Over-estimating your edge leads to over-betting, which can be more damaging than under-betting. This is why we apply conservative Kelly fractions — they buffer against model uncertainty and probability miscalibration.
Does Kelly Criterion work for multi-market betting?
Yes, but stake independence breaks down when bets are correlated (e.g. multiple markets on the same match). We cap total daily exposure to manage this correlation risk.