The Kelly Criterion

The Kelly Criterion is a mathematical strategy used to determine how much of your capital to wager on a series of bets to maximize long-term growth. It balances risk and reward by calculating the optimal percentage to bet based on the probability of winning and the payoff ratio. Betting more than this amount can increase short-term gains but also risks larger losses, while betting less may underutilize favorable opportunities. Essentially, it guides you to allocate your resources efficiently to grow your wealth over time while managing risk.