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Parcae
Glossary fundamentals

Kelly Criterion

In short: A bet sizing formula that maximizes long-term bankroll growth by betting a fraction of your bankroll proportional to your edge and the offered odds. Most bettors use a fractional Kelly (¼ or ½) to reduce variance.

Also known as: full Kelly, fractional Kelly

Kelly tells you exactly how much to bet given your edge. Full Kelly is the mathematically optimal size for long-term growth, but the variance is brutal — losing streaks can drop your bankroll by 50% or more. Quarter Kelly trades some growth for much smoother variance.