You’ve found a great bet. Now what? How much should you stake? Bet too much and a loss hurts. Bet too little and you waste a rare opportunity. The Kelly Criterion gives horse racing bettors a formula to size bets based on value — so you win more when you’re right and survive the times you’re wrong. It’s risk management, but with teeth.
What is the Kelly Criterion?
What is the Kelly Criterion?
The Kelly Criterion is a mathematical formula that helps you decide how much to wager on a bet based on two things:
Your edge (how much value the bet has)
The odds (your return if it wins)
The basic idea:
The bigger your edge, the bigger your bet — but always proportionally to your bankroll.
How it works (simple version)
How it works (simple version)
Let’s say you think a horse has a 40% chance to win, and it’s going off at 3-to-1 (25%) odds. You have an edge.
Kelly’s formula says bet:
(Edge × Odds) / (1 + Odds)
So: (0.40 - 0.25) × (3) ÷ (1 + 3) = 0.1125 → 11.25% of your bankroll
If your bankroll is $200, bet $22.50.
No guessing. Just math.
Why it’s useful for bettors
Why it’s useful for bettors
Maximises long-term growth – Kelly ensures you compound winnings rather than blow up your bankroll.
Removes emotion – It’s a math-based staking plan, not guesswork or gut feel.
Focuses on value – Encourages betting only when the odds are in your favour.
When to be cautious
When to be cautious
Only use Kelly when you’re confident in your estimated win percentage
Overestimating your edge leads to overbetting and fast losses
Many bettors use “half Kelly” to stay conservative
💡 Did You Know? Bill Benter used a version of the Kelly Criterion to build a horse racing model that made over $1 billion in Hong Kong. He reportedly once skipped a race because the edge wasn’t strong enough — even though he stood to win millions. Discipline over drama.
Frequently Asked Questions
Is the Kelly Criterion beginner-friendly?
Is the Kelly Criterion beginner-friendly?
It can be. Start with small bets and learn how to estimate your edge before using the full formula.
Can I use Kelly for exotic bets?
Can I use Kelly for exotic bets?
Yes — but be cautious. It’s harder to calculate your true edge on exactas or trifectas. Start with win/place/show bets.
Do I need a calculator for the Kelly Criterion?
Do I need a calculator for the Kelly Criterion?
It helps — but you can also use a Kelly calculator online or plug your values into a simple spreadsheet.
What’s the main risk of using the Kelly Criterion?
What’s the main risk of using the Kelly Criterion?
Overconfidence. If you misjudge a horse’s chances, the formula may suggest betting too much. That’s why many pros use half stakes.
Is the Kelly Criterion better than flat betting?
Is the Kelly Criterion better than flat betting?
It can be, especially if you’re betting with a proven edge. Flat betting is simpler but doesn’t maximise growth the way Kelly does.