Kelly Criterion Calculator

The Kelly formula

Kelly % = W − (1 − W) ÷ R, where W is your win rate and R is your average win divided by your average loss.

With a 45% win rate and winners twice the size of losers: 0.45 − 0.55 ÷ 2 = 0.45 − 0.275 = 17.5%. That is the full Kelly fraction — the share of capital the formula says to risk per trade to maximize long-run growth.

Why traders use fractional Kelly

Full Kelly is mathematically optimal only if your win rate and payoff are known exactly. In practice they are estimates from a limited sample, and overestimating your edge with full Kelly leads to deep drawdowns. Half Kelly gives up only about a quarter of the growth rate while cutting volatility roughly in half; quarter Kelly is more conservative still.

In the example above, quarter Kelly is about 4.4% per trade — still far more than most professional traders risk. Treat Kelly as an upper bound, not a target, and cap risk at 1–2% per trade.

Kelly and prop firm accounts

Prop firm rules override Kelly. With a 5% daily loss limit or a $2,000 trailing drawdown, a single Kelly-sized loss could end the challenge. Size to the loss limits first, then use Kelly only as a sanity check — and test the result in the challenge simulator.

Getting reliable inputs

Calculate your win rate and win/loss ratio from at least 100 trades of one strategy — the expectancy calculator uses the same inputs and shows whether you have an edge at all. Then convert your chosen risk into lots or contracts with the position size calculator.