Introduction
This guide goes deeper into the Kelly Criterion, Kelly multipliers, risk ranges, multi-bankroll portfolios, and how to interpret both short- and long-term growth.
The Kelly Criterion was developed by John L. Kelly Jr. at Bell Labs.
Kelly Criterion Refresher
Kelly sizes stakes according to your edge and odds to maximize long-run growth. In practice, many bettors use fractional Kelly to lower variance.
How the Kelly Criterion Works
The Kelly Criterion formula is: f = (bp - q) / b
Where:
- f = fraction of bankroll to bet
- b = decimal odds minus 1 (e.g., +150 odds = 2.5 - 1 = 1.5)
- p = probability of winning (your estimated edge)
- q = probability of losing (1 - p)
Example Calculation:
If you have a 55% chance to win a bet at +100 odds (even money):
- b = 1 (even money)
- p = 0.55
- q = 0.45
- f = (1 × 0.55 - 0.45) / 1 = 0.10
This suggests betting 10% of your bankroll.
Why Use Fractional Kelly?
Full Kelly maximizes long-term growth but creates significant volatility. A 10% Kelly bet can feel aggressive, especially during losing streaks.
Fractional Kelly reduces both the bet size and variance:
- Half Kelly (0.5×): Bet 5% instead of 10%, roughly 75% of full Kelly's growth with much lower volatility
- Quarter Kelly (0.25×): Bet 2.5%, approximately 50% of full Kelly's growth but very smooth equity curves
The mathematical relationship shows that half Kelly provides the best risk-adjusted returns for most bettors, while quarter Kelly is ideal for those prioritizing capital preservation.
Kelly Multipliers & Risk Ranges
- Very Low Risk Tolerance: ~0.25× Kelly and under
- Low–Moderate: 0.25×–0.5× Kelly
- Moderate–High: 0.5×–0.75× Kelly
- Aggressive: 0.75×–1.0× Kelly (expect deeper drawdowns)
OddsTide lets you set a default Kelly multiplier in tool settings to match your tolerance.
Multiple Bankrolls (Portfolio Approach)
Segment into separate bankrolls with different risk multipliers and market focuses.
- Core Bankroll: Lower multiplier, stable markets (e.g., major sides/totals).
- Satellite Bankroll(s): Higher multiplier, higher-variance edges (e.g., props/derivatives).
Benefits: Keeps risk compartmentalized while letting you pursue higher-variance opportunities.
Practical Portfolio Example
Total Capital: $10,000
Core Bankroll (70% - $7,000):
- Markets: NFL/NBA sides and totals, major soccer markets
- Kelly Multiplier: 0.25× (conservative)
- Typical bet sizes: $35-175 (0.5-2.5% of core bankroll)
- Focus: High-volume, lower-variance bets with consistent Positive Ev opportunities
Satellite Bankroll #1 (20% - $2,000):
- Markets: Player props, alt lines, live betting
- Kelly Multiplier: 0.5× (moderate)
- Typical bet sizes: $20-100 (1-5% of satellite bankroll)
- Focus: Higher EV% opportunities with more variance
Satellite Bankroll #2 (10% - $1,000):
- Markets: Arbitrage and Middles opportunities
- Kelly Multiplier: 1.0× (full Kelly for near-guaranteed returns)
- Typical bet sizes: Variable based on opportunity
- Focus: Risk-free or very low-risk profit opportunities
Managing Portfolio Bankrolls
Rebalancing: Quarterly, redistribute profits to maintain target allocations. If your core bankroll grows to $9,000 but satellites remain flat, move $400 to satellites to restore the 70/20/10 split.
Independent Tracking: Each bankroll operates independently. A losing streak in props (satellite #1) doesn't affect your core betting strategy or satellite #2 arbitrage plays.
Arbitrage betting applies principles from financial arbitrage theory.
Risk Isolation: If you lose 50% of a satellite bankroll due to high variance, it only represents 5-10% of your total capital, keeping your overall strategy intact.
Adjusting Strategy
Consider changes when:
- Your edge distribution shifts (e.g., more props than sides).
- Variance is higher/lower than expected.
- Your Kelly-recommended sizes feel uncomfortable (signal to reduce multiplier).
Interpreting Growth
- Short Term: Variance dominates. Track closing line value and execution quality.
- Long Term: Process quality emerges. Evaluate EV realized vs. expected, drawdown depth, and bankroll CAGR.
Common Kelly Criterion Pitfalls
Overestimating Your Edge
The Kelly formula is only as good as your probability estimates. Overestimating your win rate by just 5% can lead to dramatically oversized bets. Always use conservative estimates and validate your edge with Closing Line Value tracking.
Ignoring Correlation
Kelly assumes independent bets, but many sports bets are correlated. Betting multiple player props in the same game or sides across related games increases risk beyond what Kelly calculations suggest.
Bankroll Mismeasurement
Using "money I can afford to lose" instead of true bankroll leads to undersized bets. Your bankroll should represent capital dedicated to betting, not your emergency fund or entertainment budget.
Integrating with OddsTide Tools
Use the Positive Ev tool to identify edges and let OddsTide calculate Kelly-recommended bet sizes automatically. Set your preferred multiplier in yourTool Settings to match your risk tolerance across all tools.
For portfolio management:
- Use the Arbitrage and the Low Holds tools for your low-risk satellite bankroll
- Use the Middles tool for medium-risk opportunities
- Focus Positive Ev bets on your core bankroll
Learn the fundamentals in our Intro To Bankroll Management before implementing these advanced strategies.
Frequently Asked Questions
How much bankroll do I need to start betting professionally?
Start with at least $1,000-2,500 for serious betting. This allows proper unit sizing (1-2% per bet) and weathering of inevitable downswings. You can start smaller while learning, but undercapitalization leads to poor decisions.
What's the best staking strategy for beginners?
Start with flat betting at 1% of bankroll per bet. As you gain experience and prove profitability, consider Kelly Criterion at 0.25x (quarter Kelly) for optimal growth with managed risk.
How do I handle losing streaks?
Never chase losses or increase bet sizes during downswings. Stick to your predetermined unit size. If you lose 30% of bankroll, consider dropping down in stakes until you rebuild.
Should I have separate bankrolls for different bet types?
Yes, consider separate bankrolls for straight bets, parlays, and futures. This prevents one strategy's variance from affecting others and helps track performance accurately.
When should I withdraw profits?
Set a schedule (monthly/quarterly) to withdraw a percentage of profits (like 50%). This ensures you're actually profiting while maintaining bankroll growth. Never withdraw during downswings.
Final Thoughts
Kelly provides the math, multipliers provide the comfort, and portfolio design provides the control. Use all three to steer your risk and keep compounding responsibly.
The key is consistency: stick to your chosen multipliers, rebalance regularly, and let the mathematical edge work over thousands of bets rather than trying to time individual opportunities.