The Kelly criterion, and why almost nobody should use it whole

Stake a fraction of bankroll equal to your edge divided by the odds: (bp − q) ÷ b in decimal terms. A 55 per cent chance at even money gives (0.55 − 0.45) ÷ 1, which is 10 per cent of bankroll.

It is the stake that maximises the long-run growth rate of a bankroll, which is a different objective from maximising expected profit. Maximising profit alone recommends betting everything, and betting everything eventually loses everything.

It requires knowing your edge, which almost nobody does. Fed an edge estimate that is twice the true one, Kelly recommends a stake far above the growth-maximising level and turns a winning proposition into a volatile one.

That is also the expensive part. Over-estimated edges are the normal case, not the exception, so full Kelly in practice is usually over-betting with a formula attached to it.

What to do with it. Use a quarter or a half of the recommendation, and only with an edge estimate you could defend to somebody sceptical.