How much to bet?
So you’ve spotted what you think is a great bet. How much money should you put on? Clearly, the more you bet, the more you win, but betting the ranch could also mean losing the lot. On the other hand, making lots of little bets won’t make the most of your skill or luck.
So how can you work out the optimal amount to bet? Luckily, back in the 1950s, American mathematician John Kelly found the magic formula – and it’s still used by top gamblers. The Kelly Criterion strikes the perfect balance between making the most money while avoiding the risk of going bust. The details are complex but, put simply, the formula gives the percentage of your funds you should stake on a given bet, once you know the quoted odds and what you judge to be the real odds. So, for example, if the bookies are quoting even odds (50:50) for an event, but you judge the real probability is 55 per cent, then the formula says you should bet 10 per cent of your total pot.
But this is no get-rich-quick scheme. It’s only as good as your judgement of the real probability – which could be way off-target. And the bookies’ odds tend to be pretty accurate, so your percentage gains will usually be quite small.