The Constant Kelly Betting Bankroll Management

April 12,2021
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Jake Woodward

Constant Kelly Betting Bankroll Management

Many bettors can recognize the value in a particular sports betting market. But how do you know how much money to bet, taking advantage of the detected value and not risk more money than you should? To find out this, sports bettors apply many investment strategies. One of the most famous is the Kelly Criterion. Since its creation in the last century mid-50s by the mathematician John Kelly, this method has remained in force. Over time, variants of this method have been generated. Among them are the Kelly Constant and the Fractional Kelly. Kelly calculated that the proportion of the funds you must invest equals your advantage. Kelly's formula tells us the following:

[(Occurring Probability) x (Betting Odds) - 1] / (Betting Odds-1).

If we use the Kelly Criterion values to bet, we can say we are employing the "Full Kelly Criterion." This widely used strategy has some significant disadvantages. First, our betting bankroll can suffer abrupt changes. Indeed, your funds can go up or down quickly. Another Kelly method drawback occurs when we want to bet on several events at the same time. In this case, when adding each event, betting percentages could result in us having to bet our entire betting bankroll. One way to avoid this is to use a more conservative method. That is, betting lower amounts than those indicated by the formula. In this sense, some Full Kelly Criterion variants propose using a portion of the percentage calculated by this method. One of these betting bankroll management systems is Constant Kelly.

The Constant Kelly In Sports Betting

This Kelly method variation works the same as the traditional method. But, in this case, we will not directly multiply the percentage obtained through Kelly's formula to our betting bankroll. Instead, we will multiply that percentage by a constant or fixed value. This constant will be a proportion of our betting bankroll previously established by the bettor. Instead of betting 17% of a variable amount like our betting bankroll, we will bet 17% of a fixed amount. This fixed value will be a fraction of our funds and can be, for example, between 0 and 0.5. In this way, we will be placing a kind of cap that will protect us from falling into bankruptcy if we apply the full Kelly criterion and have a bad streak. Let's see this method version through an example. Suppose we want to bet on the victory of a team whose odds are 2.1. Besides, we determined that it has a 60% winning probability. By using Kelly's formula, we will obtain:

((0.6 x 2.1) - 1) / (2.1 - 1) = 23.64%

We should bet almost a quarter of all our funds on that event. This may seem reckless to many punters. Thus, if we apply the constant Kelly and use, for example, 0.25 as a constant value, we will have:

0.25 x 23.64% = 5.91%

So, we will bet only 5.91% of our betting bankroll. This figure is a much more reasonable figure for any bettor. This full Kelly Criterion variant is much less aggressive in terms of the amounts to bet. Therefore, it is suited to punters looking for long-term profits while preserving their betting bankroll value. However, we must accurately estimate each event occurring probabilities to have success.