Calculate the percentage of capital that maximises growth according to the Kelly criterion, plus the more conservative half-Kelly and quarter-Kelly versions.
For information only. Not financial advice. Always check your broker's conditions before trading.
How it works
The Kelly criterion calculates the percentage of capital that maximises the long-term growth of a strategy with a known edge.
In trading, full Kelly usually leads to very large drawdowns because the real win rate and ratio are never known precisely. That is why many traders use half Kelly or quarter Kelly as an upper limit on risk.
How it is calculated
f* = p − (1 − p) ÷ b
p = win probability, b = average win ÷ average loss
Half Kelly = f* ÷ 2
FAQ
What does a negative Kelly mean?
That the strategy has no statistical edge: the recommendation is not to trade it.
Should I risk the Kelly percentage on every trade?
It is a theoretical maximum, not a recommendation. With a small sample or backtest data, use a much smaller fraction.
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