Using the Kelly Criterion to Manage Your DFS Bankroll

 

Last Updated: 2017-05-31

kelly criterion dfsThe majority of information written for Daily Fantasy Sports players concentrates on who to choose for your line-up, which makes perfect sense. But there are other things DFS players can do to ensure that they show a profit in the long run. Just as it is for sports bettors, poker players or horse racing bettors, following a practical money management plan is one of those things. The one money management system that makes the most sense for DFS players is the Kelly Criterion, which some people simply know as the percentage of bankroll method. Kelly can be used in head-to-head games and double-up or 50-50 games, and gives you a good idea of the price of the contests you should be playing in.

Probably the most difficult thing regarding any Kelly system is that you have to be able to estimate your true chances of winning or finishing in the money as it pertains to DFS contests. Here, use your previous results as a guideline. If you’re finished in the money in 45 of your last 100 double-up contests, don’t estimate that you’re going to finish in the money 56% of the time. You’ll lose money faster that way because you’ll be playing in games that demand too much of your bankroll.

If you’re playing in a true double-up contest, where you risk $10 to win $10 and your chances of finishing in the money are 53%, Kelly Criterion recommend risking 6% of your bankroll. If your bankroll is $200, you should be looking for games in the $12 range, while if your bankroll is $500, it’s the $30 range.

The recommended percentages are calculated in the exact same manner as sports betting and horse racing and we’ll work through a traditional 50-50 game where you risk $11 to win $9 after factoring in the house take.

Let’s assume we finish in the money 57% of the time. Our first step is to convert the odds into numerical form: 9/11=.82. The next step is to multiply our probability of finishing in the money by the odds: .57*.82=.467. Next, subtract the odds of not finishing in the money, which is .43, and we now have .467-.43=.037. The final step is to divide .037 by .82 and you get .045 or 4.5%, meaning the recommendation is to risk 4.5% of our bankroll. The size of your bankroll will determine the size of the game you should be playing in.

The Kelly Criterion as it pertains to daily fantasy sports is a relatively new concept, but it does have some promise as a tool for helping you select the best contest you should be playing in.

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