There are of course numerous ideas, concepts and formulas that can help you calculate the ideal stake on a bet. One of them is the Kelly formula.
Of course, this is no guarantee that you will always bet correctly and the assessment of how likely the outcome of a game is, does still remain up to you. But the Kelly formula can help you choose the size of your bet.
This is how the Kelly formula works
- You choose a game or an event and rate the outcome as a percentage
Example: Austria defeats Germany – you rate this outcome with a probability of 20% - Now, you are looking for an odd for this event that seems fair to you
- Then, you put the probability and the odds in the Kelly formula and get a value from it
Let us take as an example the 20% probability of winning with odds of @ 5.50.
First we do the math, where the probability of 100% is 1:
Now we can continue to calculate and find the best possible stake for this bet. The formula used to choose a reasonable stake looks like this:
Percentage of bankroll to be set = value / (odds – 1)
In our case this means:
The Kelly Formula hereby recommends that, given the probability that you have determined yourself and the odds you have chosen, you should bet 2.22% of your bankroll on this event.
Now, of course, the use of this formula also depends heavily on your assessment of the probability. And if you consider a game outcome to be very likely and thus increase the value considerably, then it can happen that you get 30% or even more of your bankroll as a result. Of course, caution is advised here because your bankroll can slide down very quickly this way.
It is also possible that you will get a negative result when calculating the first value. This happens if you bet too low with an expected probability of winning on an event with too low odds. The result is that your value is negative, which means nothing else than: if you are unsure about this, then this bet just doesn’t pay off …
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