Kelly Criterion Calculator
Category: Risk Management
- August 31, 2026
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Optimize your position sizes based on the Kelly Criterion formula to maximize long-term growth while managing risk
Trading Parameters
%
Your historical winning percentage
:1
Average win amount / Average loss amount
$
0.5
Lower values are more conservative (Half-Kelly = 0.5)
Kelly Criterion Results
Optimal Kelly Percentage
13.8%
of your account per trade
0%
Conservative
Aggressive
100%
Recommended Position Size
$690.00
Based on 0.5 Kelly (Half-Kelly)
Full Kelly Position Size
$1,380.00
Maximum theoretical optimal size
Expected Growth Rate
2.37%
Per trade at recommended size
Probability of Ruin
< 0.1%
Chance of losing all capital
Max Drawdown (95% CI)
12.5%
Expected worst-case scenario
Risk-Adjusted Return
1.85
Higher is better (> 1 is good)
Growth Simulation by Kelly Fraction
Kelly Size by Win Rate/Win-Loss Ratio
Kelly Fraction Comparison
| Kelly Fraction | Position Size | Growth Rate | Max Drawdown | Risk Level |
|---|
About the Kelly Criterion
The Kelly Criterion is a mathematical formula used to determine the optimal size of a series of bets or trades to maximize long-term growth. It was developed by John L. Kelly Jr. while working at Bell Labs in 1956 and has since been adopted by traders and investors to optimize position sizing.
The Kelly Formula
Kelly % = W - [(1 - W) / R]
W
= Win probability (decimal)
R
= Win/loss ratio (average win ÷ average loss)
Kelly %
= Percentage of capital to risk on each trade
Benefits of Kelly Criterion
- Mathematically optimal for maximizing long-term growth
- Dynamically adjusts position size based on edge
- Prevents over-betting which can lead to ruin
- Provides a systematic approach to position sizing
Limitations to Consider
- Assumes win rate and win/loss ratio are known accurately
- Can suggest aggressive position sizes (hence the half-Kelly recommendation)
- Doesn't account for psychological factors in trading
- May not be suitable for all market conditions
Best Practices for Using Kelly Criterion
- Use a Fractional Kelly Approach: Most professional traders use 1/4 to 1/2 of the full Kelly percentage to reduce volatility while maintaining most of the growth benefits.
- Base Win Rate on Historical Data: Use your actual trading history rather than theoretical projections to determine your true win rate.
- Recalculate Regularly: Market conditions change, and so should your position sizing. Update your Kelly calculations as your trading performance evolves.
- Consider Correlation: If trading multiple positions simultaneously, account for correlation between trades to avoid overexposure to similar risks.
- Set Maximum Position Limits: Regardless of Kelly's recommendation, consider setting absolute limits on position sizes as an additional safeguard.
Risk Management Tools:
What this calculates
The bet size that maximises long-run growth for a known edge.
- Formula
f* = (bp − q) ÷ b, where b = odds received, p = win probability, q = 1 − p- Worked example
- A 55% win rate at even odds gives f* = (1 × 0.55 − 0.45) ÷ 1 = 0.10, or 10% of capital.
- When to use it
- To find the theoretical upper bound on position size given a measured edge.
- Common mistake
- Full Kelly is far too aggressive in practice, and it assumes your win rate estimate is exact. Most people who use it size at a quarter or half.