Kelly criterion
Appearance
The Kelly Criterion is a formula to determine how much money you should apply to a particular investment. If your probability of making money on the investment is W, and the payoff is P times your original investment, then the perecentage of your portfolio you should invest to increase your portfolio at the maximum rate is W - [(1-W)/P].
The Kelly Criterion was originally developed by an employee of AT&T Bell Laboratories named John Kelly to address noise issues arising over long distance telephone lines.
Link to the original Kelly paper: http://www.racing.saratoga.ny.us/kelly.pdf