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Current Bank Strategy: 4/6 v 10/1 (Kelly Criterion)

  • 11-03-2011 8:28pm
    #1
    GoldenBoot
    Closed Accounts Posts: 63 ✭✭


    I have a question about the Kelly Criterion and how it relates to current bank betting strategy.

    I would appreciate it if someone would double check my maths.


    There are 2 bets: 4/6 and 10/1.

    You have an edge in both bets of 20%.

    20% edge on 4/6 bet: win 72% of the time.

    20% edge on 10/1 bet: win 10.9% of the time.


    The Kelly Criterion states you should bet:

    30% of your current bankroll on the 4/6 bet (Your bankroll will grow, on average, by about 3.14% on each bet).

    1.99% of your bankroll on the 10/1 bet (Your bankroll will grow, on average, by about 0.19% on each bet).


    Most professional punters do not achieve better than 20% ROI (+EV) on their bets on the long run so this is an optimistic forecast but we can just focus on the theory for now.


    When someone tips they get more credit for tipping the 10/1 shot but if good bankroll management skills are used the 4/6 shot should produce more profit over the course of 100 bets even though the expected ROI (edge) is 20% on both bets.


    I was asking in a different thread about expected losing streaks for each of the bets above over the course of 100 or 1000 bets to get a better idea of optimal current bank betting strategy or at least to be able to understand how to adjust downwards the Kelly Criterion to fit in with an individuals tolerance of risk as the 4/6 shot can be expected to encounter a losing streak of 5 bets in a row which would result in a loss of 83% of the bankroll.

    When deciding how much of your bankroll to stake using a set staking plan based on the EV of your bet, what staking plan do you use and why do you feel this suits your risk/reward comfort level?

    When using a current bank staking strategy instead of a level stakes betting strategy do you feel than if two bets have the same expected ROI in a vacuum, then the bet that should win more frequently will be the more profitable bet over 1000 bets whereas in a level stakes betting strategy each bets will simply provide the same ROI and profit?





    Thanks.


Comments

  • #2
    Mellor
    Registered Users, Registered Users 2 Posts: 39,902 ✭✭✭✭Mellor


    GoldenBoot wrote: »
    Most professional punters do not achieve better than 20% ROI (+EV) on their bets on the long run so this is an optimistic forecast but we can just focus on the theory for now.


    When someone tips they get more credit for tipping the 10/1 shot but if good bankroll management skills are used the 4/6 shot should produce more profit over the course of 100 bets even though the expected ROI (edge) is 20% on both bets.

    The edge is 20%, the ROI isn't 20%.
    The two are very different.

    The reason the bankroll grows by a different amount is because the 20% edge is very different on the different bets. Basically the shorter the odds the bigger the 20% edge is

    For example, take a bet with odds of 1/5 with a 20% edge. You'd win 100% of the time


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