Over the last few weeks I haven't been very active, not on the blog, not trading odds. I haven't been sleeping my days away rather researching a new project I find quite interesting. I'll call it the "Kelly Project" after mathematician John Kelly who formulated a theory on how bettors should manage their bankrolls. A staking theory where the amount wagered is calculated from the suggested edge the bettor thinks he has over the market. Other people have explained this better and I have tried this in the past. The only problem is that even if I believe I know a thing or two about odds after a few years of trading on Betfair I haven't been sure enough of my edge. Which is what I have been researching.
Betfair claims to have the most effective betting market and Pinnacle claims to have the sharpest bettors tuning in their odds. That means that their odds should be as close to the real possibility of an event to occur as one could ever hope to get. If they say odds on team A are 1,60 I should be fairly sure the probability of team A to win should be 62.5%. This is where Kelly come in. From my research I've noticed that fairly frequently other more "casual" bookies don't adjust their odds enough, or fast enough when markets move. If team A starts a 1.70 favorite most bookies will end up around 1.70. In the final hours before kick off lots of money enters the market and can distort odds. Pinny and Betfair usually adjust very quickly and team A could very well start a 1.60 favorite while some bookies still offer 1.70. There's the edge the Kelly formula needs. In this (rather extreme) case my edge is 7% and if my bankroll is 500 I should bet 10% of my bankroll on this selection. This will be larger or smaller depending on the edge I believe I have. So in theory I should be able to use this staking method and value odds to beat the bookies.
I've decided to risk 500SEK (€55) to try out this theory. If it works it works if it doesn't it's no big loss. And to be honest I've taken some money from the bookies' new account/first deposit bonuses over the last weeks so actually they are paying for this experiment themselves. For this I'm very grateful. :)
I'll report back how it works out and I will be back to odds trading this week as well. Already secured €5 on some Tuesday League One matches.
