Full Kelly
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Half Kelly (Recommended)
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Suggested Risk per $10,000
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When Should You Use This?
Use this calculator to:
• Determine the optimal percentage of your account to risk on each trade
• Verify that your trading system has a genuine mathematical edge
• Avoid over-sizing positions that could lead to catastrophic drawdowns
How It Works
1
Enter Your Stats
Input your historical win rate, average winning trade amount, and average losing trade amount from your trading journal.
2
Apply the Kelly Formula
The calculator computes Kelly% = W - (1-W)/b, where W is your win rate and b is your win/loss ratio. A positive result means you have an edge.
3
Use Half Kelly
The recommended Half Kelly position size gives you most of the growth benefit with far less risk. The dollar amount shows how much to risk per $10,000 account.
Frequently Asked Questions
The Kelly Criterion is a mathematical formula that determines the optimal percentage of your capital to risk on a bet or trade, given your win rate and win/loss ratio. It maximizes long-term growth while avoiding ruin.
Full Kelly is mathematically optimal but assumes perfect knowledge of your edge. In practice, most traders use Half Kelly (50% of the full amount) because it provides roughly 75% of the growth with significantly less volatility and drawdown risk.
Yes. A negative Kelly value means you have no edge and should not take the trade. It indicates that the expected value is negative and you will lose money over time with this system.
Yes, for most traders. Full Kelly can produce drawdowns of 50% or more even with a genuine statistical edge. Most professional traders and hedge fund managers use between Quarter Kelly and Half Kelly to achieve smoother equity curves.
John L. Kelly Jr., a researcher at Bell Labs, published the formula in 1956. It was originally designed for optimizing signal noise in telecommunications but was quickly adopted by gamblers and later by investors like Ed Thorp and Warren Buffett.