You could now say that matters are going to get just a bit more complex. The Kelly staking plan is based on using the ‘Kelly Constant’ i.e. start bank. Kelly's Criteria was developed in 1956 by John L. Kelly and is designed to maximize the growth of your bank-roll over the long term, by determining the optimal stake on a bet. It requires that your percentage-estimations (probabilities) are better than the bookmaker’s estimations. If you are confident that you can determine value to be in your favor as opposed to that of the bookie, the following formula will tell you the optimal amount of your bank to bet.

for example:
• bank = £10.000
• your (value) estimation of the odds = 0.25 (25%)
• therefore, ((5.00 x 0.25)-1) / (5.00-1) = (0.0625) x 100 = £625.00
• your bet size = £625

Although popular with many professional bettors, many others prefer not to use it as they deem it too risky, in that it requires a large number of percentage estimations. Even if you are good enough to find a large number of overrated ‘value’ bets, using this system can still cost you money due to the resultant stake being too high. In an attempt to offset this problem, many supporters of the Kelly principle use a variation to the system called ‘Proportional Kelly’ which divides the percentage by [say] 2, and which helps minimize the risk.

If you ‘overestimate’ your ability to predict an outcome i.e. you predict a 60% chance, when the correct prediction should be 52%, you will pay for it by losing money. If on the other hand, you ‘underestimate’ your ability to predict the outcome i.e. you predict a 55% chance, when the real chance is 60%, you will win money. This is due to the fact that Kelly's formula optimises your stakes providing you are able to predict with a high degree of accuracy. With Kelly you make money by having only a small advantage on every game you pick. If you instead have a small disadvantage for every game you pick as a result of overestimating your predictions, you will lose money compared to flat stake betting.