Deciding which bets to place, and how much to wager, is something of a fine art. However, some people opt to take a more scientific approach to this, and if properly implemented, this is a tactic that can pay off. Perhaps the best-known betting system is based on an equation known as the Kelly Criterion, which was designed in 1956 by the mathematician J.L. Kelly. Of course, it doesn’t provide a guarantee of success, but it can be a very effective way of determining which bets are worth taking, and how much to wager in order to maximise gains while providing some protection against losses.
Here is the equation, in its simplest form:
Fraction of bankroll to wager = ( win probability x (net odds + 1) ) / net odds
And here’s what those terms mean…
Bankroll – the total amount of money that you are prepared to lose with a particular bookmaker, either in total or per bet.
Win Probability – the potential winning chance of the bet, based on form calculations in conjunction with estimated intangibles
Net Odds – the proportion of your stake that you stand to win. For instance, in a 2/1 bet, you would win twice your original stake plus your original stake, so the net odds would be 2. In a 9/4 bet, the net odds would be 9 divided by 4 = 2.25
Let’s say that you have calculated that the home team has a 50% (0.5) chance of winning the game in question, and the quoted odds are 9/4 (2.25 net), and put these into the equation:
Fraction of bankroll = (0.5 x 3.25) / 2.25 = 0.7222 = 72.22%
So, if you had £10 in your betting account, you would bet £7.22 on this outcome, which would net you £16.25 for a home win.
Now, let’s say the odds were a lot shorter for the same result – 4/5 (0.8) for a home win – and stick them into the equation.
Fraction of bankroll = (0.5 x 1.8) / 0.8 = 1.125 = 112.5%
Because the percentage of your bankroll is over 100%, the Kelly system dictates that this is not a good value bet, and should be avoided.
In its purest form, the Kelly Strategy is designed to maximise profits from lots of short-odds bets in succession – kind of like an accumulator that won’t go bust just because of one wrong result. While an accumulator requires you to be 100% accurate with your predictions, the Kelly Strategy only requires you to be about 90% right over the course of several predictions – which is still high, but it gives you some insurance. However, in most cases it does suggest betting a significant portion of your entire bankroll on each result, which is why many people opt to bet a fraction such as a fifth or a tenth of the result of the equation on each outcome, unless they only have a small bankroll to begin with and are taking an accumulator-style approach.