Glossary / Betting math / Kelly criterion
A ParlayAPI glossary entry

Kelly criterion

The Kelly criterion is a bet-sizing formula that scales your stake to your perceived edge and bankroll: fraction = (bp − q) / b, where p is win probability, q = 1 − p, and b is decimal odds minus 1. It theoretically maximizes long-run logarithmic bankroll growth.

Worked example

# You estimate 53% on a bet priced -105 (decimal 1.952)
        b = 1.952 - 1 = 0.952
        f = (0.952 × 0.53 - 0.47) / 0.952
          = 0.0346 / 0.952
          = 3.6% of bankroll

Full Kelly is famously volatile and assumes your probability estimate is exactly right - it never is. Most practitioners bet fractional Kelly (a quarter to a half of the computed stake) to shrink drawdowns and hedge estimation error. Kelly with an inflated edge estimate over-bets catastrophically, which is why honest edge measurement matters more than the sizing formula.

Where it shows up in ParlayAPI

Kelly needs two inputs and ParlayAPI supplies both: the offered price (any odds endpoint) and a fair probability estimate (devigged sharp-anchor prices, as used by the +EV scanner). On reading edge estimates skeptically before sizing into them: reading +EV outputs honestly.

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