Kelly Criterion Calculator
The Kelly Criterion is a mathematical formula that calculates the theoretically optimal percentage of your bankroll to risk on each trade to maximize long-term growth. Developed by John L. Kelly Jr. in 1956, it balances risk and reward based on your actual edge in the market — but most traders use a fractional Kelly (half or quarter) to reduce volatility.
Kelly % (Full)
32.50%
Half Kelly (Recommended)
16.25%
Quarter Kelly (Conservative)
8.13%
Win/Loss Ratio
2.00
How to use this calculator
- 1
Enter your win rate
The percentage of trades you win, derived from your trading history. Use at least 30–50 trades for statistical reliability.
- 2
Enter your average win
The average dollar amount you make on winning trades.
- 3
Enter your average loss
The average dollar amount you lose on losing trades (enter as a positive number).
- 4
Read your Kelly %
The full Kelly is the theoretical maximum. Most traders use the Half Kelly to reduce variance while preserving most of the growth.
Formula
Kelly % = W − (1 − W) ÷ (B / L)
W = Win rate (decimal, e.g. 0.55 for 55%)
B = Average win ($)
L = Average loss ($)
B/L = Win/Loss ratio (average gain per dollar risked)The Kelly formula subtracts the loss probability divided by the win/loss ratio from the win probability. A positive result means you have a mathematical edge and should size accordingly. A result of 0 or negative means you have no edge and should not trade this strategy. Most practitioners use half-Kelly (divide by 2) to dampen the extreme variance of the full Kelly.
Worked Example
Win rate: 55% (W = 0.55) Average win: $200 Average loss: $100 B/L ratio = $200 ÷ $100 = 2.0 Kelly % = 0.55 − (1 − 0.55) ÷ 2.0 = 0.55 − 0.45 ÷ 2.0 = 0.55 − 0.225 = 0.325 → 32.5% Full Kelly suggests risking 32.5% per trade — far too aggressive for most traders. Half Kelly = 16.25%, Quarter Kelly = 8.125%. Most traders would use 5–10% in practice.
Frequently Asked Questions
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