Kelly Criterion Calculator
Calculate the mathematically optimal position size based on your trading statistics.
Trading Statistics
⚡ Results update automatically as you type
Optimal Position Size
- Kelly assumes accurate win rate and R:R estimates
- Half Kelly (50%) is recommended to reduce volatility
- Never risk more than you can afford to lose
Kelly % by Win Rate & R:R
| Win Rate | 1:1 | 1:1.5 | 1:2 | 1:3 |
|---|---|---|---|---|
| 40% | -20% | -7% | 0% | 7% |
| 45% | -10% | 4% | 13% | 18% |
| 50% | 0% | 17% | 25% | 33% |
| 55% | 10% | 22% | 28% | 37% |
| 60% | 20% | 33% | 40% | 47% |
| 65% | 30% | 42% | 48% | 53% |
| 70% | 40% | 50% | 55% | 60% |
Negative values indicate no edge - do not trade this setup. Values shown are Full Kelly - use 50% in practice.
Understanding Kelly Criterion
What is Kelly Criterion?
Kelly Criterion is a mathematical formula that determines the optimal bet size to maximize long-term wealth growth while minimizing the risk of ruin.
Why Use Half Kelly?
Full Kelly can be volatile and assumes perfect accuracy of your statistics. Half Kelly (50%) gives ~75% of growth with much smoother equity curve and lower drawdowns.
Risk Management
Even with a proven edge, many traders cap risk at 1-2% per trade. Kelly is a maximum - you can always risk less based on your risk tolerance.
📐 Kelly Criterion Formula
Kelly % = W - [(1-W) / R] Kelly % = WinRate - (LossRate / RiskReward) Kelly = 0.55 - (0.45 / 2)
Kelly = 0.55 - 0.225
Kelly = 0.325 = 32.5%
Half Kelly = 32.5% × 0.5 = 16.25%
On $10,000 account: Risk $1,625 per trade
📈 Kelly & Expectancy
Expectancy = (WinRate × AvgWin) - (LossRate × AvgLoss) Kelly Criterion only works when you have positive expectancy. If your expectancy is zero or negative, Kelly will recommend 0% (don't trade).
Frequently Asked Questions
What is the Kelly Criterion in trading?
The Kelly Criterion is a mathematical formula that calculates the optimal position size to maximize long-term portfolio growth while minimizing risk of ruin. Our Kelly Criterion calculator helps forex traders determine ideal risk per trade based on their win rate and reward-to-risk ratio.
How do I calculate Kelly Criterion?
Kelly % = W - [(1-W) / R], where W = win rate and R = risk/reward ratio. Example: 55% win rate, 1:2 R:R = 0.55 - (0.45/2) = 0.325 or 32.5%. Our Kelly Criterion calculator computes this instantly with visual edge analysis.
Can I use Kelly Criterion for forex trading?
Yes, Kelly works for any probabilistic game including forex. However, forex has unique challenges: (1) estimates of win rate and R:R may be inaccurate, (2) markets change over time, (3) correlation between trades. Use conservative fractions (25-50% Kelly) and treat it as a maximum.
What if Kelly suggests very high percentages like 40%+?
High Kelly percentages occur with high win rates and good R:R ratios. While mathematically optimal, such high risk per trade can lead to large drawdowns. Most professionals cap at 2-5% per trade regardless of what Kelly suggests. Use Kelly as an upper bound.
Why should I use Half Kelly instead of Full Kelly?
Half Kelly (50% of the calculated Kelly) gives approximately 75% of the growth with significantly smoother equity curve and lower drawdowns. Full Kelly is too volatile for most traders. Our Kelly Criterion calculator includes fraction adjustment for conservative sizing.
How accurate do my statistics need to be for Kelly?
Very accurate! Kelly is extremely sensitive to input errors. A small overestimate of win rate can suggest excessive risk. You need at least 30-50 trades minimum to estimate win rate, and even then, market conditions change. This is why Half Kelly or less is recommended.
What's the difference between Kelly and fixed percentage risk?
Fixed percentage (like 1% or 2%) is simple and conservative. Kelly is mathematically optimal for long-term growth but requires accurate statistics and can be volatile. Most traders use fixed percentage for simplicity, consulting Kelly as a sanity check for their edge.
Why does Kelly sometimes show negative percentages?
Negative Kelly means you have no edge - your expected value is negative. You should NOT trade this setup. For example, 40% win rate with 1:1 R:R has negative expectancy. Either improve your win rate, improve your R:R, or don't take these trades.
How does Kelly Criterion relate to expectancy?
Kelly Criterion only works when you have positive expectancy (Edge). If expectancy is zero or negative, Kelly recommends 0% position size (don't trade). Higher positive expectancy allows larger Kelly percentages. Our calculator shows both metrics.
What is Quarter Kelly and when should I use it?
Quarter Kelly (25% of calculated Kelly) is even more conservative than Half Kelly. Use it when: (1) your statistics are from limited trades, (2) market conditions are uncertain, (3) you want minimal volatility in returns. Our Kelly Criterion calculator supports any fraction adjustment.