The Kelly Criterion is a bankroll management formula that determines the optimal percentage of your bankroll to wager on any bet with a positive expected value. Bet too little and you grow slowly; bet too much and you risk ruin.
Kelly Formula: f* = (bp − q) / b, where b is the net fractional odds (e.g., 0.909 for -110), p is your estimated win probability, and q = 1 − p.
If you estimate a 55% win probability at -110 (b = 0.909): f* = (0.909 × 0.55 − 0.45) / 0.909 = 5.5% of bankroll.
Most professionals use fractional Kelly (half-Kelly or quarter-Kelly) because the formula is highly sensitive to probability estimation errors. Overestimating your edge leads to overbetting and faster ruin than underbetting does.
Key insight: Kelly assumes your edge estimate is accurate. A 2% edge estimation error can turn a Kelly bet from optimal to destructive. Use conservative fractional Kelly (0.25–0.5x) when model confidence is lower.
The Kelly calculator on sharksnip.com runs full-Kelly and fractional-Kelly scenarios given your odds and estimated probability.