How the Kelly formula works
Kelly % = (b × p − q) ÷ b, where b = decimal odds − 1, p = win probability, q = 1 − p
Example
At +110 with a 52% win probability, full Kelly is 8.36% of your bankroll: $83.64 on a $1,000 bankroll. Quarter Kelly bets $20.91. The break-even probability at +110 is 47.62%, so a 52% estimate is a real but small edge.
FAQ
What is the Kelly criterion?
Kelly is a formula for the bet size that grows a bankroll fastest over the long run, given your edge. It bets more when your edge is bigger and nothing when there is no edge.
Why use fractional Kelly?
Full Kelly assumes your win probability is exactly right. Real estimates are noisy, and overestimating your edge with full Kelly leads to large swings. Half or quarter Kelly gives up a little growth for much smaller drawdowns.
Where does the win probability come from?
From your own model, or from the no-vig odds of a sharp market. If your number is no better than the market's, Kelly will tell you not to bet.