[rory borealis]

Sometimes on the gaming forums, one sees the mention of "kelly betting" or the "kelly criterion"...

I'm sure somewhere on the tech section of the rx forum, a better account exists than this...

...but this is what I recall reading from the late Huey Mahl's Handicapping Journal known as "First Twenty"....

..in this first post, i'll explain what the Kelly Criterion actually represents to the bettor

WHAT THE KELLY CRITERION ACTUALLY STATES:

for the professional gambler wagering into a positive, quantifiable edge...

...it states the OPTIMAL bet size as a percentage of bankroll......

....for example, a player who, IN THE LONG RUN, could CONTINUOSLY pick at 57%(4 wins for every 3 losses) @-110.....

...should bet 9.7% of his available wad on each discreet(non-simultaneous) betting event.



I believe it was Armani or Bad Co. at the ATSTalk Forum who stated we all need our heads examined since 94% of all who bet sports are losers.

Kelly Betting shows the truth of those words...for the winning picker can diminish profitability and even ruin himself by overbetting the percentage...in factttttt....

UNDERBETTING by the same amount as one OVERBETS by shows the same diminished level of profitability....buttt......one(presumably those 6% Armani spoke of) increases one's bankroll safety....

..better to underbet, Kelly States...not better "profit"-wise, but "safety-wise"



Kelly Betting will show you how to obtain optimal returns for various positive wagering proficiency levels.

WINNING PROFICIENCY @ -110

52.38% WINNING PROFICIENCY....... 0% OPTIMAL BET SIZE

53.1%................................... .......... 1.5%

53.85%.................................. .......... 3.1%

54.54%.................................. .......... .4.6%

55.55%.................................. .......... .6.7%

57%..................................... .......... ....9.7%


In the next post, i'll relate what Mahl stated about the Kelly Criterion...and his musings on the possible origins

[rory borealis]

For those of you old enough to remember, Huey Mahl was one of the contemporaries of Mike Lee, Mort Olshan, Billy "The Greek" Vassal, Phil Steele, and Kelso Sturgeon...


John Kelly was an electrical engineer from AT&T assigned to explain to his department's superiors a very technical subject pertaining to the distribution of electrical energy along power lines of varying efficiency...

He used an analogy...

He set up a hypothetical gambling shop where bets were past-posted a few minutes after baseball games had started...

...since the outcome of the games had not yet been determined... the bettors were working to some advantage with the inside info...

..the quirk is that the gambling analogy was perfect for gambling plays...

Canadian statistician, William Ziemba, used Kelly to look for favorable payouts in SHOW POOLS on prohibitive horse-racing favorites during the later 8th and 9th races....

...for even-money payouts...the math is much simpler...you bet in % what your advantage actually is in %


Mahl mused that at the time Kelly was composing his masterpiece...it had just been a short time since US Senator and losing VP candidate, Estes Kefauver(D-Tenn) had conducted hearings into gambling and organized crime...

...wow!...what a great way to come up with the perfect betting system for those fortunate few able to work a small positive edge over the house

[Dark Horse]

Just because someone has a winning percentage of :

57%..................................... .......... ....9.7%

or higher, that doesn't mean he won't go 0-10. In fact, a 0-10 losing streak is a certainty somewhere down the line.

I've always wondered how Kelly, not a gambler himself, would explain that to the Misses.

[rory borealis]

Just because someone has a winning percentage of :

57%..................................... .......... ....9.7%

or higher, that doesn't mean he won't go 0-10. In fact, a 0-10 losing streak is a certainty somewhere down the line.

I've always wondered how Kelly, not a gambler himself, would explain that to the Misses.

very true.... and as the late Mort Olshan of the Gold Sheet stated...perhaps 50% of all football games are decided by factors unrelated to handicapping...late punt return fumble, etc.

win 25 lose 25
...to then achieve 57% after first settling for 25/25 one now has to be 67% proficient over the next 25/25 to hit that 57%

[rory borealis]

Just because someone has a winning percentage of :

57%..................................... .......... ....9.7%

or higher, that doesn't mean he won't go 0-10. In fact, a 0-10 losing streak is a certainty somewhere down the line.

I've always wondered how Kelly, not a gambler himself, would explain that to the Misses.

I believe what you have described is called "volatility"... some other explanator of the Kelly System mentioned that one would have to carry around a bottle of "antacid tablets" like ROLAIDS or TUMS if one bet to their Kelly advantage.

Of course, in handicapping..it is probably impossible to determine what edge you are playing to....i beleive that i read that even enjoying a 2% edge one still has a 20% chance of being "in the red" after 2000 plays.
But now we have a way to at least quantify whether we have been...or CURRENTLY ARE - working to that elusive edge.

SBR Sports Forum Moderator, Justin7 in one of his Sports Handicapping training videos pointed out that---

....."win" or "lose"--- if the number you bet into is CONSISTENTLY better than the closing line... you are working to an edge

It is also a great indice of when your handicapping skills "take a vacation", as it were, or in the alternative, when the market "moves into efficiency" predicated on discovering the anomaly that you yourself had discovered which showed the market had been inefficient.

If you are no longer consistently beating the closing line---then you have lost your magic and it is probably better to "go back to the old drawing board" and look at some other angles to handicapping