Kelly Method of betting
 

Can I use the Kelly method of betting with horse racing or is it only used for sports betting

give an example

Its the same for any betting. But you need to know your edge.

In my EPL Round 1 thread you can see my estimated chance of winning, the odds and the calculations. For example lets look at my Liverpool bet:

Liverpool to beat Stoke 87/98 = 87%. Odds $1.41 (71%)

My initial bank is $1000.
My Estimated chance of Liverpool winning is 87%.
The odds are given that Liverpool only has a 71% chance.

The calc is therefore :

Liverpool betsize = ((0.87*1.41)-1)/(1.41-1) = 55%

So for Kelly staking I would risk 55%. This is fairly high :( so I would go for much less. I am using half staking in the thread and I still think that is realistically too high. You would probably want to use 1/10th Kelly staking.


Noiw for a horse its exactly the same. Lets assume I rate a horse as a 50% chance and its paying $2.10. The calc would be:

Horse betsize = ((0.50*2.10)-1)/(2.10-1) = 4.5%

Your issue is working out the rated chance at a higher accuracy then the market.

thanks for the info

Hi Benny

UB's is right. Using fully or even half Kelly is too risky when betting horses. Primarily because the use of Kelly on horse race betting means you are betting into single/multiple events where the ability to calculate your precise edge is unknown.

Personally I bet proportionally to collect 4% of my bank which is reset after each day's betting. The price pivot that I use is my assessed price. This translates to a fractional Kelly bet of approximately 25%.

My suggestion to you would be to adopt the same approach but substitute the the price pivot to be the market price unless you have a great deal of experience in producing accurate probability estimates.

E.g. If your bank is $10,000 and you are betting to collect 4% on a horse that is $2.00 in the market then your bet would be 4/$2.00 = 2 units. If the market price was $4.00 then the bet would be 4/$4.00 = 1 unit. It is assumed that your unit size in $ is 1% of your bank.

Hope that helps.

Go To www.trb.com.au

See Staking (Dan O,Sullivan ).

Its a modified Kelly used both by Dan, myself and many others.

Works extremely well.

Cheers

I came up with the following.

I give Denver Bronco's a 87% chance of winning at home, so my bet according to the Kelly method would be

((0.87*1.22)-)/1.22-1)=27% of the bank which is a little high.

What would you suggest?

Hi Benny

If you have no way of knowing your precise edge as is the case for most punters who are betting on sports/horses etc then I would suggest that around 25% Kelly is appropriate. Obviously this depends on what your overall risk threshold is. In that context, sadly most punters tend to overestimate that level and that is one of the key betting mistakes.

It has taken me years of experience and huge R&D investments to understand properly my likely edge. That said and with a risk threshold of around 50% of my betting capital I am still only willing to invest to the level described above.

At the end of the day though these decisions are yours to make. If you want me to run a betting simulation for you (long term probable ranges of outcomes) then I will need from you, what your average strike rate is, your expected profit edge in terms of a percentage and what you think your risk threshold might be. That is what percentage of your bank you are prepared to lose and still continue to bet with confidence.

Hope that helps.