No, you've mastered percentage-based wagering and variable staking. Your internal confidence scale is on point.

You're advanced. You're a sharp bettor.

OK, here's what you need to know.

The Kelly Criterion

The Kelly Criterion is an advanced variable staking strategy. This is not recommended for beginners. So, if you're faking the funk and really should be at the beginner or intermediate guide, stop reading now.

Because you could really get yourself in trouble.

OK? You've been warned.

The Kelly Criterion is a formula used by bettors - or investors - who want to grow their capital (aka their bankroll). It assumes the bettor (or investor) will reinvest his or her profits into future wagers (or trades).

The goal, basically, is to determine the optimal amount to bet into any one bet.

Components The Kelly Criterion formula accounts for your probability of winning versus your probability of losing and the decimal odds to figure out how much you should wager.

The formula looks like this:

(bp-q)

f = b Where:

• f is how much of your bankroll you should bet
• b is the decimal odds
• q is the probability of you losing
• p is the probability of your winning

How about an example

Let's say your proposed wager has decimal odds of 3.00 and your probability of winning is 0.40. That would mean your probability of losing is 0.60.

So:

((3 x 0.40) - 0.60) / 3 = 0.20

Based on the Kelly Criterion, you should wager 20% of your bankroll on the theoretical bet.

Caveats galore

Of course, the key to making this formula work is to have a reasonable ability to come up with the inputs to formulate, namely the decimal odds for the bet and your probability of either winning or losing. (Obviously, if you know either your probability of winning or losing you can figure out the other number.)

But these are not easy things to figure out.

Think about it. How can you reasonably know if the New York Knicks have a better than 50% chance of covering the spread? How can you precisely know the true decimal odds of your wager?

It's the inputs to the formula that will drive you mad.

But there is a way to start getting towards accurate numbers and it's through a strategy suggested in our intermediate's guide: tracking your bets. By tracking your bets and their outcomes, you can begin to build an objective database of wagers and outcomes, which in turn can help you come close to finding precise inputs to use in your Kelly formula.

This is why your really big-time sports bettors brag about their data. Because they use their data to construct accurate - or at least as accurate as they can make it - inputs for their Kelly formulas.

Getting to this level takes time. A lot of time. Because you need to build up a good foundation of data to feed into your formula to know how much to bet.

This, obviously, is incredibly advanced.