Kelly Criterion Calculator
Calculate optimal bet size using the Kelly Criterion.
Frequently Asked Questions
What is the Kelly Criterion?
The Kelly Criterion is a formula for determining the optimal bet size to maximize long-term wealth growth. It balances potential returns with the risk of ruin.
Why use fractional Kelly?
Full Kelly can lead to extreme volatility. Most practitioners use Half Kelly or Quarter Kelly to reduce drawdowns while still capturing most of the growth benefit.
What happens if Kelly is negative?
A negative Kelly fraction means the bet has negative expected value. You should not place the bet.
Is Kelly applicable to trading?
Yes, Kelly can be applied to any repeated game with known probabilities, including sports betting, casino games, and financial trading.
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What is this tool?
The Kelly Criterion is a mathematical formula for determining optimal position size to maximize long-term wealth growth. Formula: f* = (bp - q) / b, where b is the win-to-loss ratio, p is win probability, and q is loss probability. Widely used in trading and portfolio management. Fractional Kelly reduces volatility.
How to use
- 1
Enter win rate
Input your historical win rate as a percentage.
- 2
Set win and loss amounts
Enter average win and loss amounts per trade.
- 3
Enter account size
Input your total account balance.
- 4
Choose Kelly fraction
Select Full, Half, or Quarter Kelly.
- 5
Review results
See optimal position size and comparison table.
Frequently Asked Questions
What is the Kelly Criterion?
The Kelly Criterion calculates the optimal fraction of your bankroll to bet, maximizing the expected logarithm of wealth.
Should I use Full Kelly or fractional Kelly?
Most professionals use fractional Kelly (50% or 25%) because Full Kelly has extreme volatility. Half-Kelly retains 75% growth with much lower risk.
What if Kelly gives a negative result?
A negative Kelly result means you have a negative edge. You should not bet at all.