Kelly Criterion Calculator
Calculate the optimal bet size using the Kelly Criterion.
Maximize long-term growth while managing risk with full and half-Kelly recommendations.
Kelly Criterion
Kelly Criterion determines the mathematically optimal percentage of capital to risk on each trade to maximize long-term geometric growth rate.
Kelly % = W − (L / R)
Where:
- W = Win rate (probability of winning)
- L = Loss rate (1 − W)
- R = Win/Loss ratio (average win / average loss)
Full Kelly vs. Half Kelly:
- Full Kelly maximizes theoretical growth but with extreme volatility
- Half Kelly (Kelly / 2) sacrifices ~25% of growth for ~50% less volatility
- Most professional traders use quarter to half Kelly in practice
Key insights:
- Kelly = 0% or negative means the trade has no edge — do not take it
- Full Kelly assumes perfect knowledge of win rate and payoff ratio
- In practice, estimation errors make full Kelly too aggressive
- Kelly was designed for binary outcomes; real trading has variable payoffs
- Never risk more than Kelly suggests, even if you feel confident