Using a Value Calculator to Stop Making Bad Bets

A value calculator takes your estimated probability and the bookmaker's price and returns three things: the implied probability, your edge in percentage points, and the expected value per unit staked.

The discipline it enforces is that you must state a probability before you see whether the bet is good. That single requirement eliminates a large share of bad bets, because it is much harder to talk yourself into a number than into a feeling.

The Kelly output tells you what fraction of your bankroll the edge justifies risking. Full Kelly assumes your probability is exactly right, which it almost never is, so the quarter-Kelly figure is the more realistic guide for most people. If the calculator returns a negative edge, the correct stake is nothing.

Key points

Requires you to state a probability before judging the bet
Returns edge in points and expected value per unit
Quarter Kelly is the realistic figure; full Kelly assumes certainty
Negative edge means the correct stake is zero

Frequently asked

What if I cannot estimate a probability?

Then you do not have a view, and the honest response is not to bet rather than to guess.

Why use quarter Kelly?

Because full Kelly assumes your probability estimate is exactly correct. Fractional Kelly protects against the near-certainty that it is not.

What edge is worth betting?

Large enough to survive being somewhat wrong about your own probability. A one-point edge usually is not.

Put it to use

Using a Value Calculator to Stop Making Bad Bets

Key points

Frequently asked

Put it to use

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