Kelly Strategy · FAQ
Does the Kelly Criterion work in a casino?
For casino games like baccarat, the Kelly Criterion's optimal bet size is zero: do not bet. Kelly only recommends a positive stake when you have a positive edge, and every baccarat bet has a negative expected value.
The Kelly Criterion, published by John L. Kelly Jr. in 1956, is f* = (bp − q) / b, where b is the net odds, p the probability of winning, q the probability of losing, and f* the fraction of bankroll to stake.
Under standard 8-deck rules (Banker and Player bets push on a tie), the expected value per bet is about −1.06% on Banker, −1.24% on Player and −14.36% on Tie (paying 8 to 1). All three give a negative Kelly fraction, which means the formula says not to bet.
So the Kelly Criterion cannot turn a negative-expectation game into a winning one. What it shows is that without an edge, any bet size loses money at the house-edge rate; the bigger and longer you bet, the more you lose.
Kelly Strategy — Spot the Risks takes its name from Miles's early use of the Kelly formula in baccarat research, but the brand is not the formula itself, and nothing here promises steady profits.
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