Problem No. 1 With the Kelly Criterion

The Kelly Criterion isn’t without its flaws, however, and is seldom used in its original form. Instead, a variation of the method is used by most successful sports bettors.

The first problem with the system is that most sports bettors tend to overestimate their expected winning percentage and therefore would be betting more than they should on each game, which lowers the probabilities of having a success season.

While some bettors may scoff at the 56% figure used in as an example earlier, professional bettors will be the first to tell you there’s nothing wrong with that percentage at all. Such a percentage will lead to a nice profit over time.

Many bettors assume they are going to achieve the magical figure of 60% winners, if not higher, when heading into a new season. While such a percentage may be achieved over a short period of time, it’s nearly impossible to maintain over a long stretch.

Professional bettor Steve Fezzik describes the 60% fallacy in Larry Grossman’s book, You Can Bet on It Fezzik states if you begin with a $1,000 bankroll and wager 10% of your money on one game a day, while laying -110 odds, while maintaining a 60% winning ratio, after 2,000 wagers your initial $1,000 would be a cool $550 billion. Yes, billion. Something to remember the next time you see a sports tout claiming to hit 65% over the last 10 years.

Problem No. 2 With the Kelly Criterion

The biggest drawback to the Kelly Criterion is since it was devised for horse racing, it is equipped to handle one wager at a given time.

With Kelly’s system a wager would be made on a race and the results would be known before placing another bet. That would give the bettor time to recalculate his bankroll before placing the bet.

That is seldom the case in sports betting, where it isn’t unusual to have a number of wagers taking place at the same time. Anybody using the basic Kelly system could easily have their entire bankroll in play on any given day, which is one of the quickest methods of going broke.

There are generally two types of sports bettors. There are those who are very selective and may only wager on several games per day or there are those who use what I call the “Wal-Mart” approach and bet many games per day with the hope of grinding out a small profit. Over time, they hope those small profits add up to healthy financial returns.

Obviously a bettor making three bets on a Saturday can afford to play a larger percentage of their bankroll on each play than a person making 15 bets, so the ultimate money management system will have to factor in the number of games wagered on when deciding the ideal bet size.

Professional sports bettor Bob McCune constantly stated that he wagered 2% of his bankroll on each play, but he was the prototypical Wal-Mart bettor and would have numerous plays, as long as he thought he had an advantage over the bookmaker.

The late Mike Lee, who for years ran a very successful sports serve and was considered one of the top technical handicappers of his day, was more selective in the number of games he would release to his clients, and therefore would recommend wagering 8% of one’s bankroll of his best bets, and a slightly lower percentage on other games.

The Ultimate Money Management System

In creating the ideal money management system, it became rather obvious that it would have to have a safeguard for the Wal-Mart bettors, but at the same time, not hamper the bettor who is more comfortable making two or three bets per day by having them wager too little on each game to reach maximum profits.

We will use 4% of our bankroll as our base figure, but then subtract .1% from our bet size for every additional wager we make after our first bet of the day. (If we wager on just one game for the day, our bet size will be 4% of our bankroll.) For example, if we are going to make five bets for the day, our bet size would be 3.6% of our bankroll (4% - .4%) and if we are going to make 11 bets on the day our wagers would become 3% of our bankroll on each play (4% - 1%).

It’s important to stress when using this method all of our wagers for the day will be the same size, as we only recalculate our wagering amount once per day. Using a calculator, this can be done in a matter of seconds, so that we can spend more time handicapping games or shopping for the best lines.

What we are essentially doing is using the half-Kelly method, but adding an element that takes the number of games bet into consideration.

Those who have access to an online sports book will have no problem following the method exactly as described, as online books are just as willing to accept a bet for $106.45 as they are to accept a $110 wager, while those using private bookies are likely to have to make some minor adjustments to their bet size so that it is an even amount.

Using this money management method doesn’t assure a sports bettor of huge riches, but it is the first step in having a profitable season.