## The Kelly Criterion

Kelly Criteron is a mathematical method that helps you determine how much money you should stake on a particular bet when the stacking of odds favours you. With gambling roundly acclaimed as an appeal to emotion, it is wise to take a different approach and put not just your heart, but also your mind in the placement of a bet. Many times attention is placed on who to bet on and what bet option to take, but how much money to place- an equally important factor- is often ignored.

The formula created by J. L. Kelly, Jr in 1956 has been used a lot over the years, and a good number of gamblers attest to its effectiveness. It has a complex derivation explanation; too much trouble for those interested in just placing a bet. Here’s a simplified version:

(BP – Q) / B
B = the Decimal odds -1
P = the probability of success
Q = 1-p (probability of failure)

Basically, the more chances you have of winning, the more money you should stake out, and vice versa.

And an example of how you can actually put it to use:

Let’s say you have 100 dollars you intend to stake in a race between two horses. Your favoured horse has a 54% winning chance. Thus:

P= 0.54
Q = 1-0.54 = 0.46
B = 2-1 = 1.
(0.54×1 – 0.46) / 1 = 0.08
0.08 % is the percentage of your available stake that you should place on this bet.
0.08 x 100 = 8 dollars.

There has been a back and forth discussion on whether the Kelly Criterion, though effective, is viable in all types of betting. There are those who claim it is not applicable in sports betting, the most common betting platform today. Experts dispute this as a case of miscalculation of probabilities, which makes the application faulty from the onset. There is also issue of big profits. Kelly Criterion is quite disciplined, and as such, it is not a guarantee for huge returns on small bets. Its only assurance is guarding you from illogical risk.

## The Martingale Betting System

For gamblers who like to rely more on strategy than luck, the Martingale system is on technique I’m sure most have tried. Most new gamblers prefer to use it over others because it has the allure of winning you quick money and the (often incorrect!) perception that should have a loss or two it’s easy enough to claw it all back. The other factor that makes it a ‘go to’ for many is that even though there are systems that work better, they require a lot more maths than most people can cope with.

This type of strategy was popularised in 18th century France. The basic idea of the strategy is that the bettor keeps doubling their bet until they win and a single win would recover all previous losses winning them a profit equal to their initial stake. The bettor then reverts to the initial bet doubling again until another win comes by. This means if you placed a \$5 bet and won first time, you place another \$5 bet and continue doubling until you win again after which you go back to a \$5 bet.

The martingale system was first tried with a coin toss game where heads wins and tails losses. The strategy is also applicable to roulette where the chances of getting red or black are just about balanced (the bankers edge in this situation is the green 0, on European wheels there tends to be one 0, whereas in the US you often see two so the odds on near 50/50 bets and somewhere worse).

An example of how the system works:
In roulette, the system is applied when a player places the outside bets. The outer bets are 1-18 (Manque) or 19-36 (Passe); even(Pair) or odd(Impair); red (Rogue) or black (Noir). They have a higher chance of winning but fetch low rewards with a payout of 1:1. For instance, if you place the bet with a single chip you win a chip.

Supporters of the system rely on the inevitable win if a player keeps playing with a near 50/50 chance of winning. However, the Martingale System can only work well if the gambler has enough money to keep doubling their bet each time until they win. This usually becomes a problem because the likelihood of suffering a catastrophic loss sooner or later is immense. Aside from this, losing streaks often tend to occur more frequently than you might think. This is why most experienced gamblers shun the system as they understand that it would only guarantee wins if they held unlimited wealth, time and bets, which isn’t true in practice. Many casinos have limits too, so that’s another factor that could end uch a stratgey.

It may be fun to occasionally ‘go for it’ with the Martingale betting system, but it’s not a serious long term way of betting, because it will eventually in all likekihood result in a losing streak that will lose you everything!

## Oscar’s Grind

Oscar’s Grind as a betting strategy uses the assumption that gambling results come in streaks of wins and losses. Mostly used in Roulette, it seeks to keep increasing the betting stake during the positive streaks, and low when you’re not winning (progressive strategy). It divides the gambling event into a ‘betting units’ and ‘sessions.’

A betting unit is an amount of money that you start out with at the onset of a gambling event, while a session is the time it takes to earn profit of another one unit. Every time you win, your unit doubles. This goes on until your units increase to four, at which time you begin again at one unit. Every time you lose, you place another bet of a similar amount.

Let’s simplify that by looking at an example:

Assume you have 1000 dollars bankroll, which you divide into units of ten dollars.

Session 1:

Bet £10 and lose – Bet another £10
Lose the second £10- Bet another £10
Win £10 on third £10- Bet £20
Win £20 on new stake- End of session

So, here, you set out with £10, which you staked twice without winning. The third stake won you £10, and you placed an extra unit, which won you another £20. In total you have spent £30, and now have £40. The difference is one unit of profit, so the session is done, and you go back to another session which you start out with £10.

The upside of this strategy, whose first documentation was in Allan Wilson’s 1965 book, The Casino Gambler’s Guide, is that every gambling session ends in profit.

The downside is that it requires too much time to keep profits going, which are not assured because of streaks of losses. Also, the length of a session cannot be expressly determined. Essentially, it keeps the gambler hooked.

Oscar’s Grind is also commonly referred to as Hoyle’s Press or Pluscoup Progression within gambling circles by the pros.

## Paroli Betting Strategy

Paroli is an easy betting strategy that relies on positive progression- increasing stakes when wining and keeping tem low when there a losses. It works on the premise of wins and losses coming in streaks, and emphasizes on taking just one unit of stake from the better’s bankroll at every try. An increase of stake only comes after a win, meaning the extra risk is on money earned from the house.

The strategy, in existence since the 16th century, divides a betting event into sessions of three tries each. The aim is to register three successive wins, but also keep losses low in the event this does not occur. Each stake is increased by a unit in the event of a win, and kept at one unit whenever a loss occurs.

Example:

With a £1000 bankroll divided into £50 units.

At the start of session, bet £50. If you lose, you bet another £50, and if you lose again you end the session with another £50 bet. Your net loss is £150.

If you win the first time, you place £100 in the second round. If you win again, you place £200 in the last and final round. A win will give you a £400 pay-out, which amounts to a £350 (7 units) profit. After this point, you should begin another betting sequence with one unit.

There are eight possible outcomes in a Paroli strategy of three steps: Two wins, one break even and five losses.

Bet 1
Bet 2
Bet 3

Net result

-50
-50
-50
-150
-50
-50
+100
-50
-50
+£100
-£100
-£100
-50
+£100
+200
+£100
+£50
-£100
-\$50
-£100
+\$50
-£100
+£50
+/- 0
+£50
+£100
-£200
– £50
+£50
+£100
+£200
+£350

The upside of the Paroli system is that it requires a discipline that keeps your stakes low during losses, thus making them easy to recover with one or a few wins.

However, there is no guarantee of a win in any one three-step sequence, and the little losses may accumulate over sequences to a point where they are not easily recoverable with the same betting strategy.

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