Kelly Criterion

The Kelly Criterion is employed by many sharp players to advantage bet vs the market. It’s lazy man’s gambling at its finest. The long and the short of it’s a staking system where your risk adjusts based on the perceived edge you have for your wager.

The actual formula is:

((Decimal Odds -1)*(Probability of Success)) – (Probability of Failure )/(Decimal Odds – 1)

The first step is to remove the juice or vig from the market price. For this example, I will use Pinnacle Sports, as my definition of “The Market” and apply the Kelly Criterion to an advantage betting strategy aka Lazy Man’s Gambling.

Open a new spreadsheet, and enter the following:

Kelly Criterion Formula Step 1

Enter the following formulas in the following cells:

Cell C8 =1/B8

Cell C9 = 1/B9

Cell D8 = C8/C10

Cell D9 = C9/C10

Cell C10 = SUM(C8:C9)

Cell C11 = SUM(D8:D9)

Cell F8 = 1/D8

Cell F9 = 1/D9

Cell B14 (Kelly Criterion Excel Formula) = (((B13-1)*(1/B12))-1(1-(1/B12)))/(B13-1)

Kelly Criterion Formula Step 2

Once you’ve done that, add in a section for your bankroll:

Cell A16 = Bankroll

Cell A17 = Stake

Cell B16 = Enter in starting bankroll

Cell B17 = B16*B14

Kelly Criterion Formula Step 3

 

 

 

 

 

 

 

 

 

 

Hit enter and away you go, to adjust your spreadsheet to a half Kelly or quarter Kelly stake

Cell B18 = B17*0.5

Cell B19 = B17*.25

Kelly Criterion Formula Step 4

 

 

 

 

 

Now that the sheet is built, the steps are as follows:

  • Remove the juice to find the true odds
  • Enter the true odds for the team you want to bet in to “True Odds” (Cell B12)
  • Enter in the price you are able to bet the team at
  • Hit Enter

And there you have it, now you can properly stake your bets. Calculating your edge while ignoring the market is a whole other bag of spiders, so start with doing it against the market.

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