The best horseracing betting systems (Part 5)
What are the best ways to successfully stake your bets.
Kelly Criterion Staking Plan
Now when it comes to the discussion of staking plans, the method that many backers will argue trumps all others is this one.
So in a series that covers a whole variety of staking plans… level stakes, percentage, Fibonacci, dutching…
It makes sense to leave the best to last. Well, certainly the most complicated!
That’s possibly being a little unfair. Because the theory of this plan is sound and sensible, it’s just that when written down, the numbers can start dancing on the page if you’re not too careful.
So the basic concept of the Kelly staking plan (otherwise known as the Kelly Constant, Kelly Strategy or the Kelly Criteria) is easy enough to grasp.
And it boils down to this… the size of your stake is mathematically determined by the amount of value that is found within the odds of the bet you are backing.
In other words, in bets where you have a bigger value edge, you stake more money… and in those where your edge is smaller, you stake less.
Simple. Logical. Easy to comprehend.
But there are some failings, or weaknesses, with using Kelly.
The first of which is how accurately a backer can judge the true price of a bet, and so accurately assess the size of the value (if any) that it contains.
This is easy enough with the toss of a coin, or the roll of a dice… but the 32-team Champions League, a 20-runner handicap steeplechase, or a 156-man golf tournament.
Not quite as easy.
Kelly also, in its strictest form, could have you staking a huge percentage of your betting bank on any one bet that you deem to have a sizeable amount of value attached to its odds.
As such, staking is pre-determined and categorical… and sometimes frightening!
Now when John Larry Kelly Jnr. created this strategy in the 1950’s it was done with the best of intentions – to maximise the growth of your investment pot. A perfectly honourable sentiment.
Only sometimes, and this is found here, in order to achieve this you sometimes must be prepared to go (to stake) outside your comfort zone. And not all backers are prepared to do this, however big the potential prize.
Breaking it down, this is the formula for the Kelly staking method…
Or you’ll see it expressed this way…
Or this way…
So to use an over-simplified illustration…
e.g. we’ll start with your notional £1,000 starting bank
↪ and you’re looking at a Round 1 3-ball in a golf tournament
↪ the golfer you want to back is on offer at 6/4 (2.5)
↪ but on your tissue he’s even money, with a 50% chance of victory
↪ according to Kelly, your stake would be £166.67 (1/6 of your bank!)
How so..?
Stake = ((2.5 x 0.50)-1) / (2.5-1) x 100
Stake = 0.25 / 1.5 x 100
Stake = 16.67% or £166.67
But if algebra isn’t your strong point, you’ll find numerous Kelly staking calculators online.
It’s worth point out as well, although it’s pretty self-explanatory, if you have no discernible edge to your bet, or what you might call “negative value”, then according to Kelly you shouldn’t get involved… mind you, any betting strategy you employ should tell you this!
Likewise, if you find the method too aggressive, and demands too much of your betting bank for those bets which are deemed high in value, then an alternative is to do a “half Kelly” or a “quarter Kelly” and use the same formula as above, but simply reduce the result by a certain percentage in order to keep your cash stakes at more acceptable levels.
However, it all comes down, in the final analysis, to how accurate you are in assessing the true price of a bet, compared to the odds you’re being offered.
Work out that difference to the nth degree, and Kelly, at least on paper, appears one of the best ways forward – whether to full, half or quarter stakes.
OPINION: Rightly or wrongly, the “Kelly Method” is credited with being the best staking plan there is – so it’s fitting that we end our look at (some of) the various staking plans out there with an overview of arguably the No.1 staking system to make money. And having looked at Kelly, and compared it to other bet placement strategies, I can see what many hold it in such high regard. My personal reservations centre on two points (i) the need to pinpoint the precise amount of value in any given bet, which is very hard to do, and (ii) the requirement to “bet the farm” when the method dictates. But, to be fair, this can be softened by playing to half or quarter stakes. Like all the methods highlighted in this piece, and previous articles (see here), it boils down to one’s own risk profile. And this should remain constant in all our betting… that the over-riding factor in how we bet must ultimately be a personal decision.
