Parameters: win_p: float, probability of winning. The Kelly criterion is otherwise called Kelly bet, Kelly formula, and the Kelly strategy. Take Profit (%): Stop Loss (%): Portfolio ($): CalculateFor example, Markusson and Ohlsson applied the Kelly criterion to the Swedish stock market, and the return was about five times the market value of the same period. How to use the Kelly Criterion to manage money based on your stock trade history. Wu and Chung designed an option trading strategy via Kelly criterion, which showed the feasibility and profitability in practical scenarios. 3) / 3] = 0. If you decide on 1%, you are betting $10 for a $1000 bankroll. CryptoThe Kelly criterion in Blac kjack, Sports Betting and the Stock Marke t. The calculator will tell you whether or not you should be betting and how much to stake. The Kelly Criterion Model advances unit betting to the next level. The Kelly Criterion. Position Sizing can make or break your trading results. The Kelly Criterion is to bet a predetermined fraction of assets, and it can seem counterintuitive. The second way algorithmic traders can utilize the Kelly Criterion uses. The expected return from a winning outcome. The point of Kelly is to grow the bank exponentially, which can only be done by adjusting the bank. If your Optimal F is 18 percent, then each trade should be 18 percent of. If you can find an exploitable, repeatable edge, Kelly's system tells the maximum you should bet based upon. The Kelly Criterion is actually optimal as can be proven with a simple spread-sheet. This is where the Kelly formula comes into play: K = ( PxB – (1–P) ) / B. Since the variance in heads up will always be 1 than the formula is easily applicable to HU SNGs. The formula has a number of applications, one of which is sports betting. RoR can be calculated using the formula: Here’s an example: Suppose I have a $10000 account and I decide to risk 30% of it. Four staking plans are compared: full-Kelly, half-Kelly, quarter-Kelly and eighth-Kelly. Two simple components make up the Kelly Criterion, the first is the probability that a trade you make will return positive winnings – and the second is the win/loss ratio. If you need a convenient risk calculator for your trading, I can recommend this app. However, it’s important to remember that the Kelly criterion is not a one-size-fits-all. While most calculators compute the Kelly Criterion in terms of odds and edges ( gambling terminology ), this calculator is designed to work in terms of current and future prices (. g. Method 1 Method 2 The calculation of the Kelly criterion includes two main factors: the probability of winning and the win-loss ratio of the trading strategy. 's formula described in "A New Interpretation of Information Rate" [1]. (For example, if you have a 40% win rate, then enter the number "40", not 0. This is just common sense! The Formula for the Kelly Criterion Is. Feb 7, 2021 • Joao Rodrigues • 11 min read Kelly Criterion Monte Carlo. 2. For example, a wager with a 60% chance of being successful has a 0. Kelly was a research scientist at Bell Labs. 02. 62 Using this model you win nearly the same amount as kelly criterion. (Video) Think in Terms Of Bet . where “a” and “b” are the amounts. It was proposed by John Kelly in the 50’s who at that point was working for AT&T’s Bell Laboratories. The Kelly Criterion. Kelly Criterion for Trading. This implies a reward/risk ratio of 0. The left-hand side of the equation, f*, is the percentage of our total wealth that we should put at risk. Kelly in his famous article on the. Add your expected win probability for the selection you have chosen in the cell called “Win Probability”, using values between 0% and 100%. . So am I correct in assuming the Kelly Criterion is: =0. 215×10−1. 09. 5%. How probabilistic forecasts can be fully leveraged to an optimal allocation using the Kelly criterion. The Kelly formula is : Kelly % = W – (1-W)/R. The formula takes. 5. In the one asset two valued payo case, the optimal Kelly wager is the edge (expected return) divided by the odds. PointsBet, the renowned sports betting and iGaming firm, has released its Q1 financial report for the 2024 fiscal year, covering the trading period ending on Sept. Unsurprisingly, the volatility or variance in the evolution of the bankroll is greatest for full-Kelly and least for eighth-Kelly. is the author of the Kelly criterion formula from 1956. However, unlike in the previous situation we examined the Kelly Criterion for, there is not a nite number of outcomes of a bet on a security, so, we will use The Kelly Criterion is straightforward to calculate: you only need two inputs to determine the optimal betting size: The win/loss ratio – the win percentage of your trading strategy (R) (dividing the total gains of the winning trades by the total loss of the losing trades) The win ratio of the trading strategy (W) (the number of trades that. Should you wish to use the Kelly Criterion Calculator for a new calculation, simply tap the RESET button in green. The thresholds and the Kelly criterion simultaneously constrain the trading system in order to increase the profits of the trade, which is in the final rounded rectangle. The intuition is that over multiple periods the geometric average return is. Does apply kelly now give better results? If kelly value is say 44k. He derived a trade sizing. so basically Kelly is exactly what I wrote above, and then then exp/log and end up maximizing the mean of the $log(1 + f u)$ in the exponential. Use the Kelly Criterion to identify the mathematical optimum amount of capital which you should alloc. Thorp extended the Kelly Criterion logic and developed an adapted. One simply produce a probability and severity gradient while the other is actually an adjusted KC that limits drawdown (but also limits optimized return profiling). Business, Economics, and Finance. How to develop a good trading strategy to achieve long-term stable profit is the dream of many people []. , see: "The Kelly Criterion in Blackjack Sports Betting, and the Stock Market" [2]. U = (30% of $10000) / $200 = 15. We do this by maximizing the median outcome with respect to the size of our bet, ℓ. The Kelly Criterion calculation is used to calculate the optimum stake or position size for a given event, and is made up of four factors. 40. The Kelly criterion is a formula developed by John Larry Kelly in 1956. 3. the kelly criterion helps with the decision of how much one should invest in a asset as long as you know the odds and expected return of said asset. * R = Historical Average Win/Loss ratio. so it could be hard to apply to something as complex as options trading in real life with non-discrete outcomes and variable. The formula was derived by J. Ziemba . So, when your account value is $10,000 and you use 60% of your account value to trade, you will use $6,000. Conclusion. May have to change the equation to get exactly like kellyBy the way, I took you through the formulas just so you could get a sense of how changes in rake or winning percentage alter your optimal plays, but you can and should use a Kelly Criterion calculator. cash or bonds). The casino is willing to pay 2 to 1 on any bet you make. In probability theory, the Kelly criterion (Kelly, 1956) [] gives the bet size conditions required for gambling wagers to almost surely achieve the maximum exponential growth rate of wealth (or “bankroll”) based on assumed probability of success if the wager were to be placed repeatedly ad infinitum. The Kelly criterion or Kelly strategy is a formula used to determine position sizing to maximize profits while minimizing losses. For a single commodity, the most critical skill is the position sizingyeah, multi-tabling is the challenging part that I haven't figured out. Kelly Criterion DOES: Define the point of maximum growth, given known. The problem with this is that KC completely upends this. Odds The odds offered by the bookmaker or exchange. 12 winning trades out of 20 total gives 60% Winners) These columns have the greatest impact on the Kelly equation. In this video, you will learn how to maximize account growth by defining optimal position size using a fractional Kelly Criterion approach and minimizing you. 62. 077 / 0. It's free to sign up and bid on jobs. The goal was to figure out the best ways to manage signal-noise. A much simpler derivation of the Kelly Criterion. PR = The average profit per trade divided by the average loss per trade (in dollar amounts). I want to calculate the Kelly bet for an event with more than. Today the best prop trading firms use this formula to maximize the possible. The Kelly Criterion is a mathematical formula that helps gamblers determine optimal bet sizes and maximize profits. The approach underlying the calculation takes into account the performance of previous trades. 62 billion. This is a good place to talk about what Kelly Criterion does and what it does not do. I can run backtest simulations to get a sense of historical "edge" and "odds". Kelly Jr, a researcher at Bell Labs, in 1956. but it's probably something I'm overthinking. trading. Notice that, when the assets are not correlated, the optimal result is the same as for a single asset. 8% stake really just means you are betting 7. 5) ell = 2 (p - 0. Parameters: win_p: float, probability of winning. Adjust your posterior for information the market has. W = Historical. The Kelly Formula is: Kelly % = W – (1-W)/R where: * Kelly % = percentage of capital to be put into a single trade. If there is a fixed amount of bets the Kelly criterion will be suboptimal, but as the number of bets grows the optimal strategy will asymptotically reach the Kelly criterion. I have a few calculators I use to do this. Winning Probability : Enter the probability of earning a. The Kelly Criterion is a money management formula that calculates the amount you should bet when there is a difference between the “true” odds and the given odds. Figure Two: The. 38 percent Kelly bet, or $53 of your current bankroll ($1,220 x 4. Not actually using full Kelly. Here are the steps that you have to follow in order to use our Kelly Criterion Calculator: Add your current betting balance in the cell called “Current Betting Balance”. I start trading a mean reversion strategy with a 70% win rate, and $200 risked per trade. Although it may appear confusing, it’s actually pretty simple. Your expected value is $0. Follow these steps to determine your optimal bet stake using the Kelly Criterion:1. Kelly % = W/A – (1 – W)/B, where W is the win probability, B is the profit in the event of a win, and A is the potential loss. went bankrupt doing arbitrage trading in Russian government bonds. Never Go Full Kelly. The Kelly criterion calculator is a powerful tool for managing your money when gambling or investing. Let XIt causes that the position size is hard to be estimated by the Kelly criterion. To calculate the “W,” divide the number of trades that brought in a positive amount by your total number of trades. By using the Kelly criterion formula, you can make informed decisions about the optimal size of your bets or investments to maximize long-term growth. Generally, the Kelly criterion is a formula that maximizes the expected value of the logarithm of wealth that is equivalent to maximizing the expected long-term growth rate. Effective capital management can not only help investors increase their returns but also help investors reduce their. The purpose of the Kelly criterion in investing is to see how much money you should put into a single trade. 124 2 = 5. Because betting odds have associated probability, we can use that to help calculate our suggested wager. 00 being returned. The virtues of trading using the Kelly Criterion. 36 – 3,60,000. Explore math with our beautiful, free online graphing calculator. I am always puzzled about the kelly or other methods. If they allow the customer to bet too big in the start they might be able to win and wipe them out in one go, but forcing customers to use small bets ensures that profit approaches the expected value, which for all games is tilted in the casino's favor. Handbo ok of Asset and Liability Management, Volume 1, Edite d by S. Economic Data; Blueprint; My Service. 4. To use the kelly criterion reasonably in trading you will need to follow these steps: Access at least one sample of one hundred trades you have executed. Here is a range of useful trading calculators I made up in an excel spreadsheet, it includes: Simple and advanced money management, trade cost, trade accuracy, kelly criterion, consecutive losses, growth projections, monthly turnover volume, pip value, and account cumulative profit/loss percentages. Trying to find the best way to fit a circle into a square is challenging and risky. at Bell Labs, is a strategy for the optimal sizing of bets in the repeated bets scenario in his seminal paper¹. The Kelly Criterion assumes that the purpose of your trade is to maximize your growth of capital, and will reinvest your winnings. Gamblers use this percentage to. Kris Verma is a successful pharmacist and sports better turned day trader. You win $100 if the dice shows up as a 1, 2, or 3. The Kelly Criterion is a mathematical formula that helps gamblers determine optimal bet sizes and maximize profits. To use the kelly criterion reasonably in trading you will need to follow these steps: Access at least one sample of one hundred trades you have executed. And that article is using the same hypothesis that I am - look at your OWN trading record to calculate probabilities, etc. In such a case, the Kelly criterion suggests that if one were to go over 20% repeatedly on a low. 025. This tool can be used to compare markets and odds, as well as find the implied win percentages for a given team. 1. "Next to trading discipline, money management is the single most important factor in determining your success as a trader. This gives us a Sharpe Ratio of S = 0. The equity balance. Kelly Criterion for Trading. Disclosure. " GitHub is where people build software. This is where the Kelly formula comes into play: K = ( PxB – (1–P) ) / B. Tastytrade has some videos on applying kelly's criterion to options trading. 1. Home. 14, marking the brand’s mobile debut in the United States. The famous coin-flipping exercise that many investors use to measure the performance of chance. 2. rr: float, reward to risk. From video with Daniel Jassy (Spider Crusher):. A = (Success % /. L. s = b * (o. Kelly and is widely used by traders and gamblers to determine the position size for each trade/bet. The formula is as follows: Kelly Formula . 48. The Kelly criterion is a well-known strategy for sizing bets to maximize long-run expected log wealth. That is, put them at risk in the future. Professional traders and investors globally use the Kelly Criterion, a formula, to determine what percentage of their total capital they should put in a single trade. These two factors are then input into the Kelly Criterion equation. We hope this skill can be applied to any futures trading strategies by using option buy-side. A 50% chance of a 50% drawdown is a lot to stomach. Ranking among the top-performing. To maximise your outcome try to bet on events which have the closest odds at the bookie and exchange, for example betting Arsenal to win a match at 2. On 40. 67% of your account balance on a single trade. Search for jobs related to Kelly criterion calculator or hire on the world's largest freelancing marketplace with 23m+ jobs. This money management system is best. 60 – 0. 05/1 = . Using the results from your past trades calculate ‘W’, which is the probability of a trade ending as a. The Kelly Criterion requires there are no other rules other than the Kelly Criterion. the Kelly Criterion to the stock market. This formula determines the optimal % of your account that you can bet to get the most profitable outcome in the long run. There are two key components to the formula for the Kelly criterion: the winning probability factor and the win/loss ratio. if your max loss is 50%, optimal-f will be double kelly. In the stock market, money is invested in securities that have high expected return [3]. In addition, we propose the Kelly stationary index (KSI) to quantify the stationarity of the stock's outcomes distribution, which will affect the trading period and forecasting frequency. Library "FunctionKellyCriterion" Kelly criterion methods. 6. 50. 40) / 1 = 0. The literatures show the. L. 82*((X/Y) + 1) - 1)/(X/Y) comments sorted by Best Top New Controversial Q&A Add a Comment. If a fully Kelly stake was 8%, then the half-, quarter- and eighth-Kelly stakes would be 4%, 2% and 1% respectively. It is vital that your Avg. meaning that the parameters of the equation needed to calculate the Kelly Criterion vary every. Mathematical formulation ; Monte-Carlo simulation. The Kelly criterion is based on a trader’s history of at least 100 trades. If the dice bias were less, at 53%, the Kelly criterion recommends staking 6%. PK. 26%. Only then you can calculate geometric mean, which is a comparison value for comparing the profitability of your strategies. We've actually covered the binary Kelly Criterion and the single-asset Kelly Criterion before - so check those articles out for some more background. 40) / 1 = 0. In this note I show how to calculate the variance of the estimated Kelly criterion ratio. Take Profit (%): Stop Loss (%): Portfolio ($): Calculate The Kelly Criterion is a formula invented by J. A Kelly Criterion online calculator. kelly (prob_win=0. 077 / 0. Download our free and easy-to-use Kelly Criterion Calculator by downloading this excel. The amount won is $200 or multiple of the odds based on the stake. Kelly Criterion Calculator Kelly Criterion Calculator The Kelly criterion is an advanced money management method that helps traders determine what proportion of their trading capital should be invested in a particular position. top of page. Here is how to optimize a variable using the "Kelly Criterion" script: - Create a new trading system then add the Kelly Criterion. Search for jobs related to Kelly criterion calculator trading or hire on the world's largest freelancing marketplace with 22m+ jobs. Suppose we have initial capital X 0 and we want to determine the optimal betting fraction f to invest each year in S&P 500 stocks. Even supposing Kelly's formula was directly applicable to investing, it needs a long sequence of trades, with gains re-invested, to show its benefits. 62. . 6 winning probability. The virtues of trading using the Kelly Criterion. 67 billion is largely attributed to Wynn Resorts’ Macau operations. Stock Trading tools and resources. Then, plug them into the equation. the Kelly Criterion to the stock market. The Kelly Formula is: Kelly % = W – (1-W)/R where: * Kelly % = percentage of capital to be put into a single trade. To associate your repository with the kelly-criterion topic, visit your repo's landing page and select "manage topics. 5 if you want to wager 50% of the stake recommended by the Kelly criterion). Theoretically, however, the Kelly Criterion could go much higher than 100% and be calling for 200%, 300%, 500% allocation (i. Updated: Sep 7, 2023. 16 would guarantee only a very small overall loss. I tried to write a real-time trading system, however do not know how to fit a Kelly model into the system. It emerged from statistical work done by John Kelly at Bell Laboratories in the 1950s. November 05, 2017 / 11:09 AM IST TradeCalculates theoretical hold including sports betting exchange commissions based on an Excel range of US or decimal odds. You may notice a pattern too where if you have an even-money bet (i. Put simply, the Kelly Criterion or Formula is a way to calculate how much of their assets a Forex trader should risk on any given trade in order to maximize the return. If you’re extremely confident in a trade, consider sizing up to your K%, (5 -. Both bets and trading positions deal with probabilities. Well, say hello to Kelly’s Criterion! 14. 0 (100%), but if you do not want to wager the full. Folks in the trading world like to complain about Kelly or Optimum-f being too risky. The strategy is prevalent and is used as a revered staking plan among stock market investors and sports bettors to gain an edge. I risk 2k. The trade calculator tells you how much your trade size should be based on your risk profile you specified to the left in the "Percent Bankroll used". Kelly, who was a member of a research center at AT&T’s Bells Lab, New Jersey in 1956. You have to remember that the basic Kelly Criterion formula is meant to optimize bets for black-and. L. There are two key components to the formula for the Kelly criterion: the winning probability factor and the win/loss ratio. Many well known investors use it, including Warren Buffett and Bill Gross. After 5000 bets, betting with the Kelly Criterion yields a total capital of between $5000 and $10000 (a percent increase of capital of over It causes that the position size is hard to be estimated by the Kelly criterion. 71% of your capital, or $57. The Kelly Criterion is a formula that was developed by John L. 00 =. . This is to control risk and avoid blowing up. Managing Risk With Math. According to a study Schaeffer's Senior Quantitative Analyst Rocky White conducted highlighting the 25 best S&P 500 Index (SPX) stocks in January going back 10 years, Chipotle Mexican Grill stock. To practically apply the Kelly Criterion, investors can follow a systematic approach: Analyze past trading or betting data to identify the winning probability and win/loss ratio. We explain how it works, and discuss its advantages and disadvantages. A Kelly Criterion sports betting calculator can be used to manage your sports betting bankroll and determine optimal bet sizing. The Kelly bet size is found by maximizing the expected value of the logarithm of wealth, which is equivalent to maximizing the expected geometric growth rate. This says we’re trying to find the values of f (the amount we allocate. You have $1,000 with you. class KellyCriterionStrategy (bt. 5) ell = 2 (p - 0. 50 and your odds are 2, so you should bet 25% of your bankroll ($0. Understanding Kelly Criterion. The formula in D5 is where Kelly does the magic: =(D1*D3-1)/(D3-1) The result is the proportion of your bankroll recommended by the Kelly Criterion. In addition, this research uses the Kelly criterion for fund management; that is, the Kelly criterion is used to calculate the optimal investment score. As demonstrated, the Kelly Criterion solves for one of the fundamental problems of investing and trading: position sizing. The Kelly Criterion is to bet a predetermined fraction of assets, and it can seem counterintuitive. This program calculates the optimal capital allocation for the provided. It just happens to coincide with log-utility. ℓ = 2 ( p − 0. , & Ohlsson, E. * W = Historical winning percentage of a trading system. Kelly himself was an interesting character: a chain smoking Texan who used to be a fighter pilot in the Navy during World War 2, he was also brilliant. For obvious reasons, if your sports betting bankroll is, say, $5,000, you should not stake it all on one bet, regardless of how great you think the bet is. 3. Kelly can be murder during a bad losing streak, so sports bettors often reduce the Kelly. as I said, I only do 2 tables at most, so its not a problem. ” Kelly Multiplier RoR can be calculated using the formula: Here’s an example: Suppose I have a $10000 account and I decide to risk 30% of it. It can seem counterintuitive in real time. The expected return from a winning outcome. All that is required is to calculate the median of each portfolio using these returns and then find the portfolio with the largest median. Developed by John Kelly, who worked at Bell labs, the Kelly Formula was created to help calculate the optimal fraction of capital to allocate on a favorable bet. where One very important criteria, your trading system must have a Positive Expectancy and a minimum of 100 historical trades (see the Expectancy Tool). The second point is that the trading strategy is difficult to determine the winning rate in the financial market and cannot be brought into the Kelly criterion to calculate the optimal fraction. 980, in other words allocating 98% of your capital to a single position. A formula called the Kelly Criterion solves just this problem. It’s doable. This is related to the above points about more control and lower fees, but it goes beyond that. The picture above has 2 simulations of betting at 20%, 50%, and 75% and 4 at the Kelly Criterion amount. 3 – [ (1 – 0. R = Historical Average Win/Loss ratio. B – payout on the bet. Marcin Zamojski School of Business, Economics and Law at the University of Gothenburg Institution: Financial Economics Credits: 15 ECTS Authors: Emil Ohlsson and Oskar MarkussonThe Kelly Criterion is a formula that calculates the optimal staking plan for a series of bets. Jan 11 21, 15:44 GMT. Stock Trading tools and resources. As an example, the next image shows the progression of the equity curve with the same sequence of gains and losses, using 15% and 25% trade sizes in the mentioned coin-toss game. Facebook. Kelly Criterion When Trading on a Single Equity. It’s doable. The trade calculator tells you how much your trade size should be based on your risk profile you specified to the left in the "Percent Bankroll used". The amount won is $200 or multiple of the odds based on the stake. These two factors are then input into the Kelly Criterion equation. The formula is as follows: f = the fraction of the bankroll to bet. The resulting optimal bet for this type of game, as a fraction of wealth, is. Apply the kelly formula and get the fraction that optimizes the. But in most cases, to win on a trade we need. First, you decide what percentage you would like to bet. 40 - 1) 3 = 0. But the formula works only for binary bets where the downside. 11 hours. The Kelly Criterion is comprised of two basic components. Kelly is a very aggressive investment strategy. Comments. Kelly and is widely used by traders and gamblers to determine the position size for each trade/bet. The Kelly criterion, which was first introduced by John R. So if your edge is 10% on a bet at even-odds, Kelly says to bet 10% of your bankroll; but for the same 10% edge on a bet at 10-1 odds, Kelly says to bet. It was found that the formula, which has a gambling background and helps to determine the optimal bet size, can also help with finding the ideal investment size. (1923 – 1965) Developed the Kelly Criterion, a formula to proportion bets based on a disparity between given odds and true odds. 39 - 5. How to apply the celebrated bet-sizing and CASH-management formula in trading and wagering. Example of the optimal Kelly betting fraction, versus expected return of other fractional bets. 20 or 20%. Disclosure. Bettors will now adopt a 1/2, 1/4 or 1/8 Kelly Criterion bankroll strategy (consistently using the same fraction as part of the method). How to develop a good trading strategy to achieve long-term stable profit is the dream of many people [14]. It was described by J. Kelly Criterion When Trading on a Single Equity. Motivation . For example, a wager with a 60% chance of being successful has a 0. In this paper, we. g. 16 20:50 #3. Would be great The developers would have a great app if not for the bugs . The method is based on a mathematical formula designed to enhance expected returns while reducing the risk involved. I tried to write a real-time trading system, however do not know how to fit a Kelly model into the system. Please, remember, the game started. Originating from a 1956 paper by computer scientist John Kelly, often termed the "Fortunes Formula," this approach gained prominence through Edward Thorpe's adaptation to triumph in. E. In probability theory, the Kelly criterion (or Kelly strategy or Kelly bet) is a formula for sizing a bet. John Larry Kelly, Jr. For example, a $100 stake at 3. It can then tell you the optimal amount. Source Code：Real Time. q. This gives us a Sharpe Ratio of S = 0. From the graph, betting with the Kelly Criterion clearly has an advantage over constant betting. The first of these is the probability of a positive outcome, or a winning trade. What is Kelly Criterion and Kelly Value?The formula you have quoted is the discrete Kelly criterion. This is all the information we need in order to use the Kelly formula (p = 40% and r = 3). What does KELLY CRITERION mean KELLY. Position Sizing can make or break your trading results. Facebook. If you check out Wikipedia or Investopedia, you’ll see formulas like this: f ∗ = p − 1 − p b − 1 f ∗ = p − 1 − p b − 1. The ESPN Bet Massachusetts launch is set for Nov. 32 = $101. The great thing about the formula is that it’s flexible enough to work where information or skills can give you an advantage by estimating the outcome probabilities. 14. For example, if you have $10,000 in your trading. The reason is because in order for the. e. The Kelly Criterion is a mathematical formula used to determine the optimal amount to bet based on the edge you have over the sportsbook. The widget below calculates how much one should bet based on three factors. Here are the statistics traders need to calculate the Kelly Criterion: Kelly Criterion Calculator is a tool for finding the optimal investment size to maximize profits on repeated investments. ” In the more common cases, the value that solves for the Kelly Criterion is not the optimal “fraction” of a trading account to risk. That is, he wanted to find (for each market system) an optimal number of contracts or lots, which should be traded with a certain account balance in order to maximise the capital growthKelly's Criterion Bet Size Calculator Here's a spreadsheet to play around with the above equation and calculate optimal bet sizes. In addition, we know that the average winning trade produced a profit of $1500, and the average losing trade lost $500. 3) / 3] = 0. If you want to be more conservative than the Kelly criterion, enter a value less than 1 (e. Calculate your probability of winning W. , and is analogous to the one in Fortune’s Formula: Kelly % = edge/odds.