2023 Author: Leah Sherlock | [email protected]. Last modified: 2023-08-25 09:26
The interest of a person in quick earnings without extra labor has led to the popularity of casinos and sweepstakes and other gambling games. In most cases, bets are made based on intuition or completely by accident. However, some believe that you should not rely only on fortune, but you can calculate what bet will bring the win. For this, various mathematical formulas began to be used. One such strategy is the Kelly criterion.
This financial strategy was developed by John Kelly in 1956. Its essence is to determine the amount of the bet depending on the player's available bank. The use of the strategy is quite complex. And at first, the probability of losing significantly exceeds the percentage of successful bets. In addition, it does not protect against defeat and does not guarantee that all bets settled using it,will be winning. This applies to all other existing strategies. No one in history has yet been able to come up with the perfect formula that allows you to always win at the casino, on the stock exchange or on the sweepstakes.
The essence of the Kelly criterion is to calculate the outcome of an event based on a correct analysis of various factors and a conclusion based on them. Your own assessment of the development of events should be different from what others, for example, a bookmaker, believe. First you need to look for those bets that, in the opinion of the player, are overpriced by the bookmakers. If, according to the player, they are incorrect, then they need to bet on them, the amount of which must be calculated using the formula.
Bet size=(bookmaker's oddsplayer's event score - 1)/(bookmaker's odds - 1)
The player's event rating is entered into the formula as a decimal number. That is, the probability, expressed as a percentage, must be divided by 100, and the resulting number must be entered into the formula.
How to count
One area where the Kelly Criterion is often applied is in sports betting. Technically, it is not difficult to calculate the bet that can be placed.
Based on the size of the player's money. For example, it is equal to one thousand.
The bookmaker believes that football club "A" will beat club "B" and the odds are 2.0. The player believes that the rate is too high. Reasons why his point of viewdifferent, may be very different. For example, club "A" is in better physical shape, club "B" has several injured players, which can affect the teamwork. Club "A" usually plays well in this part of the season. As a result of the analysis, the player thinks that the probability of winning club "A" is 58% (0.58).
The calculation will look like this:
(2, 00. 58–1)/(2–1)=0, 176
To convert to monetary terms, the bet size must be multiplied by 100. As a result of the calculation using the Kelly criterion, the bet will be 176.
If the outcome is unfavorable, the next bet is calculated based on the remaining funds, that is, from 824.
Optimal calculation conditions
One of the components of success is the correct assessment of the available facts. To do this, it is recommended to carry it out while in good physical and psychological condition. Fatigue, bad mood after a loss, euphoria after a win increase the possibility of making a mistake with the assessment of events, and the Kelly criterion will be calculated incorrectly.
The probability that events will turn out in a certain way cannot be 100% or close to it.
You should avoid low odds. It is desirable that they be no lower than 1.8. Otherwise, the gain will be negligible, and you need to spend no less time on the analysis.
Flaws of the strategy
The Kelly Criterion is a strategy that does not allow you to get rich instantly. According to experts, the average profit per run rate is 5%. Heran increase is possible with constant correct prediction of events, which does not always happen. This requires experience, so beginners are advised not to use this strategy.
To win more, you need to have a pretty good bank reserve. Experts say that it should be equal to at least 15 player's average stakes.
Benefits of the strategy
The main advantage of the Kelly Criterion is pretty good loss protection. If a person is mistaken and loses the bet, then this is far from all the money that he has. At the same time, as the bank decreases, the size of the subsequent bet decreases. Therefore, you can play for a long time. If losses are replaced by wins, which almost always happens, then you can play almost endlessly.
For those who have just started using the Kelly Criterion method, it is recommended not to place a bet resulting from the calculation by the formula, it can be made slightly less or even reduced by half. As you acquire the necessary knowledge in the field of evaluating the coefficients of bookmakers and develop an effective approach to the analysis and prediction of events, the bet can be equal to the calculated one.
In addition, this strategy allows you to earn often. With proper analysis and calculations, a stable income is guaranteed. The higher the pot, the higher the bet, which allows you to significantly increase your winnings. But it also increases the amount of loss in case of an error.
The Kelly Criterion is used in stock exchanges, casinos and sports betting.competitions. Due to the complexity of the strategy, many players prefer to use other strategies that are just as effective. In this case, the player is not obliged to limit himself to using only one calculation method, he can use several at the same time.
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