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The Kelly Criterion is a bet-sizing technique which balances both risk and reward for the advantage gambler. It determines the optimal % of your total capital (ie bankroll) that you can bet on a single outcome or game. Here is the formula for the Kelly Criterion copied from Wikipedia:

Where:

• f* is the fraction of the current bankroll to wager;
• b is the net odds received on the wager (“b to 1”); that is, you could win $b (plus the $1 wagered) for a $1 bet
• p is the probability of winning;
• q is the probability of losing, which is 1 − p.

As an example, if a gamble has a 60% chance of winning (p = 0.60, q = 0.40), and the gambler receives 1-to-1 odds on a winning bet (b = 1), then the gambler should bet 20% of his bankroll at each opportunity (f* = 0.20), in order to maximize the long-run growth rate of the bankroll.

If the gambler has zero edge, i.e. if b = q / p, then the criterion recommends the gambler bets nothing.

If the edge is negative (b < q / p) the formula gives a negative result, indicating that the gambler should take the other side of the bet.