1. #1
    luegofuego
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    Kelly feels huge

    Have pretty much been flat betting so far, but decided to try to apply Kelly in the future. Looked around at a couple of bets and Kelly just seems so incredibly aggressive. For example, with an example roll of $50,000 and a bet that pays 1.57 on a 1.52 shot, Kelly tells me to bet $1,900, or ~4% of my roll. 1.57 on a 1.52 shot doesn't even feel like that big of an edge! Does anyone here use full Kelly? I know theres half and quarter Kelly, but doesn't using half or quarter Kelly kinda defeat the whole purpose of a mathemetically optimized bet sizing strategy?

    Just wanted input from people ballsy enough to employ this, because as I said, $1,900 on a bankroll of that size feels pretty huge...

  2. #2
    roasthawg
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    I use a flat 2%... still seems big to me, especially after a good win streak. It definitely takes discipline.

  3. #3
    That Foreign Guy
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    I use full Kelly but divide my roll in to several parts depending on which system they are so I am sort of only using 5th Kelly overall.

    I may well change this once I am very confident in win rates etc.

  4. #4
    CatPulp
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    Kelly is contingent on your edge. How big of an edge do you think you have and keep in mind, this has to be statistically consistent, not just a one-off based on the odds offered on one sporting event.

  5. #5
    bztips
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    One of Thorp's papers has a good discussion of the tradeoffs in deciding whether/how to use fractional Kelly:

    http://www.pitt.edu/~sorc/trade/files/RiskManagement/kelly.pdf

  6. #6
    statictheory
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    Not to promote dr bob, but he has some great articles on betting and money management at dr bob sports.

  7. #7
    CatPulp
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    Oh, and by the way, if you aren't hitting your bets at at least a 64% success rate, then this bet has a negative expectation value and you should not bet it.

  8. #8
    u21c3f6
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    Quote Originally Posted by luegofuego View Post
    ... but doesn't using half or quarter Kelly kinda defeat the whole purpose of a mathemetically optimized bet sizing strategy? ...
    Below is an answer I wrote for a past thread on Kelly:

    Here is how I look at it and this is also based on many years of use.

    Kelly is without a doubt the mathematically proven optimal wager for bankroll growth assuming (and this can be a big assumption) that you know the actual edge of your wager. Early on I used full-Kelly. However, being relatively conservative, I did not like the volatilty that my bankroll had using full-Kelly. In researching money management further, it seemed to me that half-Kelly might be the way to go. The comparison goes like this:

    Using full-Kelly, there is a 1/3 chance that your bankroll would fall in half before it doubled. Using half-Kelly, you still have 75% of the growth rate as full-Kelly but with half-Kelly there is only a 1/9 chance that your bankroll will fall in half before it doubles.

    Having used both, I am personally much more comfortable using half-Kelly. I prefer to watch my bankroll increase in size by a nice small zig-zag pattern than the more extreme ups and downs of full-Kelly. Once you double your bankroll, you will be making wagers equivalent to full-Kelly of your original bankroll only now with a greater degree of safety.

    One other thing I also do is to segregate different types of wagers as well as different odds to determine my edge. For myself, I find that different types of wagers and different odds have a different edge which is critical for the Kelly calculation. If I was to lump all of this into one data pool I could come up with one composite edge but that is not as optimal as knowing that I have a higher or lower edge based on the type of wager and the odds and then sizing my wagers accordingly.

    Joe.

  9. #9
    byronbb
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    A 2% edge demands 6% at -300 and less than 1% at +300. Flat betting these is a)underbetting and b) over betting, and therefore at least sub-optimal to BR growth. (I am not a math guy but flat-betting might actually increase variance).

    It all comes down to how sharp the lines of the sport you are betting are. If it is a huge market like the NFL or the EPL and you can get edges then bomb away full-kelly. With smaller markets use some sort of fraction.

  10. #10
    Flying Dutchman
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    There are many historical threads written on Kelly here at the Tank. I'd suggest some research.

  11. #11
    Maverick22
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    I dont know about Kelly. But the ladies say Maverick feels huge. Giggidy.

  12. #12
    statictheory
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    Quote Originally Posted by CatPulp View Post
    Oh, and by the way, if you aren't hitting your bets at at least a 64% success rate, then this bet has a negative expectation value and you should not bet it.
    yes but his articles are very good

  13. #13
    jgilmartin
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    Quote Originally Posted by Maverick22 View Post
    I dont know about Kelly. But the ladies say Maverick feels huge. Giggidy.
    Haha I knew it was only a matter of time before someone posted a 'that's what she said' type comment based on the thread title.

  14. #14
    CrimsonQueen
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    It's quite a tough decision... but the easy truth is, if you can determine your edge to a T, then you would be stupid not to use Kelly! If you can't estimate your edge to a T (and I'd say this goes for 99% of bettors), then you'd be stupid to use Kelly!

    So the question isn't "should I use kelly"...the question is "can I estimate my edge accurately?"

  15. #15
    roasthawg
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    Quote Originally Posted by CrimsonQueen View Post
    It's quite a tough decision... but the easy truth is, if you can determine your edge to a T, then you would be stupid not to use Kelly! If you can't estimate your edge to a T (and I'd say this goes for 99% of bettors), then you'd be stupid to use Kelly!

    So the question isn't "should I use kelly"...the question is "can I estimate my edge accurately?"
    Good post... estimating the edge is the toughest part by a longshot.

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