There are also times when the suggested Kelly bet may be larger than you can stomach. In these cases, it's sometimes suggested that you scale back just to be safe. If that horse you felt had a 2-1 shot to win the race is showing up on the tote board at 40-1, it might be suggested that you wager a large portion of your bankroll. Unless you are truly sure you're 2-1 assesment is correct, it might be wise to wager a little less.
Related Links
- Josh Kuperman's
Kelly Criterion Page
For a fairly simple explanation of the mathematics behind the Kelly Criterion (note that this page also contains a small error, the example calculation .240 - 0.584 / 0.510 should read .240 - 0.584 / 8.14).
Also, since it's not quite clear on Josh's page, the 'bet' column reflects the percentage of your bankroll that you should bet on that horse. .205 means 20%. That may seem scary to some people, but if you see a horse with a fair value of 3-1 going off at odds of 10-1, it's a good bet (assuming your fair value is right).
- John Kelly's
Original Paper
In Adobe Acrobat format and only for the mathematically inclined. Otherwise it'll all seem like jibberish.
