Any horse racing system must have a money management component built in. This is of paramount importance. Without this component, it is still possible to lose huge sums of money no matter how much research a bettor does. It is only by minimizing losses and maximizing wins that you can hope to become a profitable bettor. That is the heart of any horse racing system.



By Design

The Kelly Criterion will maximize your bankroll over the long term. It gives you a method of calculating the optimal amount to bet on a given horse in a given race. You will also be taking advantage of overlays and underlays. This system was designed by a man named John Kelly in the 1950s. Since then it has become an important part of any viable horse racing system. It has been mentioned a lot in betting books and is considered the baseline strategy when it comes to money management.

The Inner Workings

Any horse racing system is helped by the Kelly Criterion. This is because it leverages the odds. It finds overlays and determines what portion to bet of a bankroll based on how much it is. It takes the expected rate of return and risk involved and factors it into Kelly's utility function. When you bet more than the amount yielded, you are risking too much. When you bet less, your wins will be smaller.

So your horse racing system will be betting percentages of your bankroll. As your bankroll grows, so will your bets. The inverse will also hold true. These percentages vary according to the expected rate of return on a given bet. That is why you will never bet your entire bankroll on a single horse. It is also unlikely you will make a huge bet unless you spot a huge overlay which is a rarity.

Not All Roses For Kelly

It is true that there are problems with the Kelly Criterion but none of them makes it unusable. It works best when you have the final odds of all runners. This is not feasible in pari-mutuel so you will have to make do. There is also the assumption that you are a better judge of a horse's chances than most people. This is a huge assumption to make since the heart of the Kelly Criterion is taking advantage of overlays and underlays.

In any case, the Kelly Criterion must be taken as a long term component to a given system. It is not designed to bet everything in your pocket. It also assumes you are keeping meticulous records of your bets, losses and wins. This does not come easy for most people. They just want to go to the track and have fun. But if you are a serious better, you want to win. You want to end up profitable while having all the fun. If you are a serious bettor, you are probably more competent than most of the people at the tracks. Thus, you should use the Kelly Criterion to your advantage.