Kelly Criterion vs. Flat Betting: Bankroll Management for Algorithm Bettors
Flat betting stakes the same amount on every bet; the Kelly Criterion stakes a share of the bankroll proportional to the edge. Full Kelly maximises growth only with exact probabilities, so most bettors use 1-2% flat stakes or quarter-to-half Kelly with a cap.
What Is Flat Betting?
Staking one fixed unit, typically 1-2% of bankroll, on every bet. Simple, robust to bad estimates and low risk of ruin, but it ignores edge size.
What Is the Kelly Criterion?
f = (b x p - q) / b, where b = decimal odds - 1, p = win probability, q = 1 - p. At odds 2.20 with a 50% estimate, full Kelly is 8.33% of bankroll. A zero or negative result means no bet.
Why Full Kelly Is Dangerous
Probabilities are estimates. Betting twice the true Kelly fraction drives growth to about zero, and full Kelly routinely produces 50%+ drawdowns.
Fractional Kelly
Half Kelly keeps about 75% of the growth rate with roughly half the volatility. Quarter Kelly suits new models. Cap single stakes at 2-3% of bankroll.
Which Staking Method Should You Use?
Flat betting without calibrated probabilities or under ~500 tracked bets; fractional Kelly with a calibrated model that beats the closing line.
Frequently Asked Questions
Most bettors use 1/4 to 1/2 Kelly. A unit of 1-2% is standard. Staking cannot make a negative-EV strategy profitable.