Kelly calculator
Kelly criterion calculator
Calculate the mathematically optimal position size for your trading strategy. Choose Full, Half, or Quarter Kelly based on your risk tolerance.
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How do you use the Kelly Criterion formula?
Kelly % = Win rate - ((1 - Win rate) / Win/Loss ratio). Enter your historical win rate as a decimal and your average win divided by your average loss. A 55% win rate with a 1.5:1 average win/loss: 0.55 - (0.45 / 1.5) = 25%. This is the percentage of your capital to risk per trade for maximum long-term compound growth. Most traders apply Half Kelly to reduce volatility.
Should I bet the full Kelly amount?
Most professional traders do not use Full Kelly. Full Kelly maximizes long-run growth mathematically, but large drawdowns are statistically expected even with a genuine edge — and small estimation errors in your win rate produce large real-world losses. Half Kelly captures roughly 75% of the optimal growth rate while cutting variance roughly in half. Quarter Kelly is appropriate when your edge estimate is based on a small sample or a newer strategy.
What is the Kelly Criterion in sports betting?
In sports betting, the Kelly formula is expressed with odds: Kelly % = (Odds x Win probability - Loss probability) / Odds. For a bet at 2.0 decimal odds with a 55% estimated win probability: (2.0 x 0.55 - 0.45) / 2.0 = 32.5% of bankroll. The same principle applies to trading — any situation with a quantifiable edge and repeated opportunities benefits from Kelly-based sizing.
What does a negative Kelly value mean?
A negative Kelly value means your strategy has no mathematical edge — expected value is negative and you will lose money over time at these parameters. The optimal position size is zero. Before trading this strategy with real capital, you need to improve your win rate, increase your average win relative to your average loss, or both. A Kelly of exactly zero means your edge is breakeven.
What is the difference between Full Kelly, Half Kelly, and Quarter Kelly?
Full Kelly risks the mathematically optimal fraction but produces extreme equity curve volatility — large drawdowns are expected even with a real edge. Half Kelly (50% of the Kelly %) captures roughly 75% of the optimal growth rate with significantly lower variance. Quarter Kelly (25% of the Kelly %) is very conservative, capturing less of the optimal growth but with much smoother returns. Most practitioners use Half Kelly as the default and Quarter Kelly when edge estimates are uncertain.
What is the main limitation of the Kelly Criterion?
Kelly assumes your win rate and reward-to-risk ratio are precisely known and stable over time. In live markets, both fluctuate. A small overestimate of win rate produces a dangerously large Kelly fraction. Always use conservative estimates, cap the output at 2% to 5% per trade, and recalculate regularly as your trade history grows.
How many trades do I need to calculate a reliable Kelly fraction?
At minimum 30 to 50 closed trades to get a statistically meaningful win rate, and ideally 100 or more across different market conditions. With fewer trades your win rate estimate has high variance, which translates directly into an unreliable and potentially dangerous Kelly output.
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