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Kelly Criterion Calculator

Calculate optimal position size based on your edge

Quick Presets:

1%99%
Win/Loss Ratio (R)2.00

You win $200 for every $100 risked

Kelly Formula

K% = W - [(1-W) / R]

K% = 0.55 - [(1-0.55) / 2.00]

K% = 32.50%

You Have an Edge
Full Kelly
32.50%
Expected Growth Rate+9.856% per trade
Half KellyRecommended
16.25%
Expected Growth Rate+7.498% per trade
Quarter Kelly
8.13%
Expected Growth Rate+4.468% per trade

Recommended Position Size

0%ConservativeOptimalAggressive50%+

Warning: Full Kelly is Aggressive

Full Kelly maximizes long-term growth but with extreme volatility. A 50% drawdown has a ~50% probability even with positive expectancy. Most professional traders use Half Kelly or less to smooth returns and account for uncertainty in their edge estimates.

Growth Rate Comparison (per trade)

Full Kelly
+9.856%
Half Kelly
+7.498%
Quarter Kelly
+4.468%

Half Kelly achieves ~75% of full Kelly growth with significantly lower variance

Understanding the Kelly Criterion

The Kelly Criterion determines the optimal bet size to maximize the geometric growth rate of your capital. The formula balances the risk of ruin against the opportunity to compound gains.

The Kelly Formula Explained

K% = W - [(1-W) / R]

  • K% = Kelly percentage (fraction of bankroll to bet)
  • W = Win probability (win rate as decimal)
  • R = Win/Loss ratio (average win / average loss)

Why Traders Use Fractional Kelly

  • Estimation Error: We never know our true edge precisely. Using fractional Kelly provides a safety margin.
  • Lower Volatility: Half Kelly has 75% of the growth rate but far less variance in returns.
  • Psychological Comfort: Smaller positions are easier to hold through drawdowns.
  • Practical Constraints: Real trading has transaction costs, slippage, and correlation between bets.