The KELLY PLAN
I’ll be honest here and say that I had never heard of this staking plan before getting a request for me to try and explain the system. Having googled ‘kelly staking plan gambling’ I was still none the wiser. Thanks Jack, you could have asked for ‘Level Stakes Staking’!
Well, having stuck with it hopefully I’ve got it sussed but if my explanation is wrong then I’m sure someone out there will be putting me right.
It’s quite complex and relies on a lot of estimated or assumed variables and certainly won’t be to everyone’s taste but here’s how it works….
The Kelly Plan is based on something called the Kelly Constant and was developed in 1956 by mathematician John L. Kelly. You have to be able to estimate the chances of your selection yourself and then compare this to the actual odds available. If you are able to do this better than the bookmakers you’ll be fine as using the Kelly Criteria will optimise your staking. Unfortuantely for most of us that is a big IF!
So firstly, you have your bank, say £100, and then you pick your horse out and make him a 3/1 chance to win the race. You convert these odds to a %, in this example 3/1 becomes 25%
The best price you can get on your selection with the bookmakers is currently 5/1. The next step is to work out your stake by using the Kelly formula which is
[ (odds x estimation) -1 / (odds - 1) ] x 100 = stake
or using our example figures….
[ ( 5 x 0.25) - 1 / (5-1) ] x 100
which equals £6.25. This is your stake.
As long as you are able to evaluate ‘value‘ correctly this Staking Plan will work for you.
As I said it’s not for everyone and does involve a fair degree of estimation but apparently no self-respecting professional punter can do without this Staking Plan.
Like all staking systems there have been many adaptations and with the Kelly Plan there is also the ‘Proportional Kelly’ that divides the % by 2 to give less aggressive staking and helps minimize any risk of getting the odds estimation wrong.
Benefits: Optimises your staking to get the maximium benefit from any winner
Downfalls: You need to be able to correctly assess a market and know your odds %’s
Requirements: Maths Degree would help
Probable Outcome of using this plan: You’ll realise that calculating odds is best left to the bookmakers and go back to using Square Root Staking System
Type of person this system suits (suited): Einstein, John L. Kelly