Decrease Your Bet Size After a Loss

If there is anything that Kelly Criterion tells you about your wagering it is this, you must decrease the size of your next bet after a loss and only increase it if you win.

In other words, chase your winnings but never chase your losses.

For many gamblers (and I mean gamblers rather than astute investors) a losing bet sends them into a panic and certain ruin. They start chasing their losses with ever increasing bets in a vain attempt to recoup their losses.

If your last bet was a losing one then the first thing that should come to mind is, "Is the system still working?" In other words is the losing bet percentage in line with the original system. Is it an expected run of bad luck? Or is the system simply a bad one that must be discarded?

Kelly Criterion tells you that you must bet as a function of your chances of success and the size of your betting bank. That is the only way to maximise the growth of your bank.

If your last bet was a losing one, your bank is now smaller, therefore your next bet will be smaller too. Don't get trapped in the fallacy of martingales.