Bankroll management and the Kelly criterion

Your bankroll and your unit

Your bankroll is the money you set aside for betting and can lose without harm to your life. A unit is a fixed share of it, commonly 1 %: with a bankroll of 1,000 a unit is 10. Staking in units keeps each bet small beside what you have, and makes a losing run something you can survive.

Never bet money you need for rent, food or bills, and do not top up your bankroll to chase a loss.

Flat staking

The simplest plan is to stake one unit on every bet. It is easy to follow and keeps your risk steady, but it treats a bet with a small value and a bet with a large value the same.

The Kelly criterion

The Kelly criterion, from the mathematician John Kelly, gives the share of a bankroll that grows it fastest in the long run when you know the true chance. For a bet at decimal odds, with a chance p of winning, the Kelly share is (p × odds - 1) ÷ (odds - 1).

A worked example: you make a result 55 % likely and the price is 2.00. The Kelly share is (0.55 × 2.00 - 1) ÷ (2.00 - 1) = 0.10 ÷ 1.00 = 10 % of your bankroll. A quarter of that is 2.5 %.

The top of the formula is the bet's value, chance × price - 1. With no value there is no stake: if it is zero or less, Kelly says not to bet.

Why most people stake a fraction

Kelly assumes your chance is exactly right, and it never is: it is an estimate, and estimates are noisy. If you overestimate your chance, full Kelly bets too much and your bankroll swings wildly. Even with the right chance, full Kelly produces big losing runs on the way. Staking a half or a quarter of Kelly gives up some growth in return for a far smoother ride and a wide margin for error.

Results are noisy, too. Are football tips accurate? shows how long a run of losses can last even when the chances are right, which is the other reason to keep stakes small.

How Dawn Odds sizes a tip

• A tip's stake is in units, where one unit is 1 % of your bankroll.
• It is a quarter of the Kelly share, and never more than three units.
• It is worked out as if the price were no more than 5 % better than it should be. In football a price far above the market's is more often a mistake in our numbers than a bargain, so a bigger gap does not buy a bigger stake.
• On football in the smaller leagues and cups, where betting is thin and prices are soft, a stake is at most one unit.
• No new tip is given in the last two hours before kick-off.

You can check any bet with the Kelly calculator.

Rules that protect a bankroll

• Decide your bankroll and your unit before you start, and keep to them.
• Set a limit you will not go past in a day, a week and a month.
• Do not raise your stakes after a loss to win it back.
• Keep a record of every bet, so that you can see what is really happening.
• Stop if betting stops being fun. Responsible gambling says where to get help.