Bankroll Management: Kelly Criterion

Value betting, with its focus on identifying favorable odds, is a strategic approach that demands not only a deep understanding of the sport but also effective bankroll management. To navigate the ups and downs of the betting world and maximize long-term success, mastering the art of allocating your bankroll is crucial. In this blog post, we’ll explore the significance of bankroll management in value betting and introduce the renowned Kelly Criterion, a formula designed to optimize your wager sizes.

The Importance of Bankroll Management

Bankroll management is the backbone of any successful betting strategy, providing a structured framework for how much money to stake on each wager. The primary goals of effective bankroll management in value betting include:

  1. Preservation of Capital: Protecting your bankroll from substantial losses ensures you can continue to participate in future opportunities.

  2. Minimization of Risk: By carefully determining bet sizes based on your bankroll, you can minimize the risk of significant downturns and potential busts.

  3. Optimization of Returns: Strategic bankroll management aims to maximize long-term returns by allocating funds to bets with the highest expected value.

The Kelly Criterion Explained

Developed by John L. Kelly Jr. in 1956, the Kelly Criterion is a mathematical formula designed to help bettors determine the optimal size of a series of bets. The formula takes into account the probability of winning and the odds offered by the bookmaker to suggest the percentage of your bankroll to wager.

The basic form of the Kelly Criterion is expressed as:

f* = (bp – q) / b


  • f* is the fraction of the current bankroll to wager.
  • b is the odds received on the bet (decimal odds).
  • p is the probability of winning.
  • q is the probability of losing (1 – p).

Understanding the Kelly Criterion Implementation

  1. Calculate Expected Value (EV): Determine the expected value of each bet by multiplying the probability of winning (p) by the potential profit and subtracting the probability of losing (q) multiplied by the potential loss.

    EV = (bp – q)

  1. Apply the Kelly Criterion Formula: Plug the values into the formula to calculate the recommended fraction of your bankroll to wager.

    = EV / b

  1. Adjust for Consistency: To avoid over-betting and potential volatility, many bettors choose to use a fraction of the recommended f*, such as half or two-thirds.

  2. Regularly Update Assessments: As probabilities and odds change, it’s crucial to recalculate the recommended bet size regularly to adapt to evolving circumstances.

Practical Tips for Effective Bankroll Management

  1. Start Conservatively: Begin with a smaller percentage of your bankroll to mitigate risk while gaining confidence in your value betting strategy.

  2. Review and Adjust: Regularly review your bets, reassess your expected values, and adjust your bankroll management strategy accordingly.

  3. Avoid Chasing Losses: Stick to your predetermined bankroll management plan and resist the temptation to chase losses with larger bets.

  4. Diversify Bets: Spread your bets across a variety of opportunities to reduce risk and increase the potential for positive returns.

Bankroll management is the cornerstone of success in value betting, and the Kelly Criterion provides a powerful tool for optimizing your wager sizes. By carefully calculating the expected value of each bet and applying a disciplined approach to bankroll allocation, you can navigate the dynamic world of value betting with confidence. Remember, the key to long-term success lies in a balanced and strategic approach to managing your betting funds.