Using Kelly Multiplier

[AgainstAllOdds]

I am currently getting into Kelly but cannot find the advantages and disadvantages of betting half kelly, 3/4 kelly and full kelly.

The little bit I can understand, Full Kelly is a more aggressive approach and should only be used with larger bankrolls.


Any insight would be very helpful and if someone could tell me which one would be ideal to use with a $500-$2000 bankroll, that would be great.

[reno cool]

This is one of the problems. For Kelly to have any meaning you'd need to count everything you have of value plus everything you can make as bankroll. If you're just setting aside an amount you're willing to risk, you need to determine how much that amount means to you. And therefore again you're back at the same point.

In general I'd say the opposite is true. The larger the br the more conservative you should be. % wise

[u21c3f6]

I agree with reno, the larger your bankroll the more conservative you should be with your Kelly %.

Kelly relies on you "knowing" your edge. The problem is if you overestimate your edge, Kelly will give you a % that is too high for your bankroll and you risk ruin. The worst thing that can happen if you underestimate your edge is that your bankroll won't grow as fast.

I am actually relatively conservative and use a half Kelly. I have a pretty good idea what my edge is overall but not necessarily for each individual event. Using half Kelly prevents me from overestimating my edge in most if not all events and is also a psychological boost for me to know that the chance of me running out of bankroll is close to nil. In other words, I am never betting scared money.

If you have an edge, by using half Kelly you will still be able to double your bankroll (how long it takes depends on your edge and activity) and at that time you will be making wagers in the amount of a full Kelly based on your original bankroll but with a lot more safety now that your bankroll is doubled.

Joe.

[Neil Nollidge]

Rather than bet cKelly, adjust probabilities, then bet full Kelly: Let rated probability = Pr. Let betting market ( adjusted to 100% ) probability = Pm. Let working probability = Pw. Pw = cPr + ( 1 - c )Pm. With an unrealistic market of 100%, this method instructs the same bets as fractional Kelly. The larger the market %, the more inferior fractional Kelly appears to be. Most of the handicappers who are concerned about the efficiency of their rated probabilities, do not factor the market into their working probabilities.

[Pancho sanza]

What is the formula for risk of ruin using full kelly?

thanks

[Justin7]

Compare these 2 options:
Full kelly
Half kelly

With full Kelly, you are likely to have staggering fluctuations. Your risk of ruin (or catastrophic loss) is much higher. So is your expected profit.

With half kelly, your upsides/downsides will be smaller. You'll be less stressed. You're less likely to suffer a "carreer ending year". The flip side is that if you make lots of EV bets, your long term growth is lower.

Before picking one, ask yourself: "How sure am I of my advantage?" If you don't have a VERY good feel for your edge, forget kelly. Stick to flat betting 1% of your bankroll until experience teaches you your edge.

[Wrecktangle]

Three problems with using Kelly for most folks: having an accurate prior knowledge of what your win % is (takes a lot of back testing to find this), knowing under what conditions those priors will change (even more testing), not understanding that the sport changes and thus your priors can change with it (need a large db with many years of data). In the NFL, since so very few games are played, to understand how the sport changes you need a db that goes back to the last major change in the sport: 1994. This is why the NFL is so very hard to model correctly and why most folks are driven to use fractional Kelly or flat betting.

So, unless you are seriously good in math & stat, and a pretty decent model builder with a lengthy db in your chosen sport, you basically have no good reason to use full Kelly as it will break your ass faster than any other money management system. Of the people I meet in these internet forums, I would say 1 out of 1000 at best are capable of doing this.

[Pancho sanza]

Compare these 2 options:
Full kelly
Half kelly

With full Kelly, you are likely to have staggering fluctuations. Your risk of ruin (or catastrophic loss) is much higher. So is your expected profit.

With half kelly, your upsides/downsides will be smaller. You'll be less stressed. You're less likely to suffer a "carreer ending year". The flip side is that if you make lots of EV bets, your long term growth is lower.

Before picking one, ask yourself: "How sure am I of my advantage?" If you don't have a VERY good feel for your edge, forget kelly. Stick to flat betting 1% of your bankroll until experience teaches you your edge.

Justin, is it possible to define it in % terms, ie, what are my odds of losing 50 %, 75 %, 90 % of my bankroll etc if I knew my inputs, edge, # plays per day, win probability etc.

thanks

Maybe Ganchrow can chime in?

[AgainstAllOdds]

What is the formula for risk of ruin using full kelly?

thanks

http://forum.sbrforum.com/handicapper-think-tank/63547-risk-ruin-calculation-received-via-pm.html

[Ganchrow]

A bit on risk-of-ruin and fractional Kelly:

http://forum.sbrforum.com/players-talk/43790-question-about-units.html#post378883

[Pancho sanza]

Thanks Guys

[roasthawg]

So much easier just to bet 1/40 of your roll on games.

The one thing I've never understood with Kelly is why does bet size go down w/multiple simultaneous events?

[Ganchrow]

So much easier just to bet 1/40 of your roll on games.

The one thing I've never understood with Kelly is why does bet size go down w/multiple simultaneous events?

Let's say you were just betting 1/40 of your bankroll on all games.

What if you had 41 games on which to bet?

[roasthawg]

Let's say you were just betting 1/40 of your bankroll on all games.

What if you had 41 games on which to bet?

Is that the purpose of reduced bet sizes with simultaneous events? If that's the case why not keep the standard bet size until the sum of the bets exceeds the total bankroll?

[reno cool]

Let's say your first 20 you lost a lot. You would have liked to reduce bet size, but you can't. So even if you have enough to cover all bets there's still a problem.

[Dark Horse]

Your max bet size should be the maximum amount that you're comfortable losing without causing any stress (flat, or any fraction of Kelly). Remember that you're going to repeat the same process countless times. Why would you want to put yourself in heart attack mode every time there's a game on? To maximize profit so you can pay for your hospital bill down the road?

[waiverwire]

Let's say your first 20 you lost a lot. You would have liked to reduce bet size, but you can't. So even if you have enough to cover all bets there's still a problem.

Right. Another way of saying that would be that the size of each bet needs to weight the likelihood of each of the other simultaneous bets losing.

[waiverwire]

Two other things to consider with Kelly (or really any bet sizing system):

1. Is your 'bankroll' your lifetime bankroll, or just some arbitrary number. If you're going to just reload if you lose it all, then you can afford to bet more aggressively.

2. Is there any minimum bet size allowed. If so, your risk of ruin (where you no longer have enough to place a bet) is going to be a little higher, and bet sizes will need to be smaller.