Kelly Criterion
The Kelly Criterion is a formula that determines the optimal theoretical size for a bet.1
General formula:
\[ f^* = p - \frac{q}{b} = p + \frac{p-1}{b} \]
where:-
\( f^* \): is the fraction of the current bankroll to wager
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\( p \): is the probability of a win
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\( q \): is the probability of a loss \( (q = 1 - p) \)
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\( b \): is the proportion of the bet gained with a win (\( 1 \) means you will gain the same amount you bet)