Kelly Criterion Calculator
Calculate the optimal position size using the Kelly Criterion formula. Enter your win rate, average win, and average loss to find the mathematically optimal percentage of your account to risk per trade.
Enter your win rate, average win, and average loss, then click Calculate Kelly % to see the optimal position size.
Kelly Criterion Formula
Kelly % = W - [(1 - W) / R]
Where W = win rate and R = avg win / avg loss
Worked Examples
Example 1: Moderate win rate with 2:1 reward
You have a 55% win rate with an average win of $200 and an average loss of $100.
- W = 0.55, L = 0.45, R = $200 / $100 = 2.00
- Kelly % = 0.55 - (0.45 / 2.00) = 0.55 - 0.225 = 0.325 = 32.50%
- Half Kelly = 32.50% / 2 = 16.25%
- Quarter Kelly = 32.50% / 4 = 8.13%
A strong edge. Most traders would use Half Kelly (16.25%) or less to reduce drawdown volatility.
Example 2: Low win rate with 3:1 reward
You have a 40% win rate with an average win of $300 and an average loss of $100.
- W = 0.40, L = 0.60, R = $300 / $100 = 3.00
- Kelly % = 0.40 - (0.60 / 3.00) = 0.40 - 0.20 = 0.20 = 20.00%
- Half Kelly = 20.00% / 2 = 10.00%
- Quarter Kelly = 20.00% / 4 = 5.00%
Even with only 40% wins, a 3:1 reward-to-risk ratio still produces a positive Kelly. This shows why R:R matters as much as win rate.
How to Use This Calculator
- Enter your win rate — the percentage of trades that are winners. Pull this from your trading journal or backtest results.
- Enter your average win — the average dollar amount you make on winning trades.
- Enter your average loss — the average dollar amount you lose on losing trades.
- Enter your account size (optional) — if provided, the calculator shows dollar amounts for Half Kelly and Quarter Kelly.
- Click Calculate Kelly % — the calculator returns the full Kelly percentage, Half Kelly, Quarter Kelly, win/loss ratio, and expectancy.
- Choose your Kelly fraction — most traders use Half Kelly or Quarter Kelly to reduce volatility while still capturing the edge.
Frequently Asked Questions
- Should I bet the full Kelly amount?
- Almost never. Full Kelly maximizes long-term growth rate but comes with extreme drawdowns — sometimes 50% or more. Most professional traders and portfolio managers use Half Kelly or Quarter Kelly. You still capture most of the edge with significantly less volatility.
- What happens if Kelly is negative?
- A negative Kelly means your strategy has a negative expected value — you lose money on average. The mathematically correct position size is zero. Do not trade a negative-edge strategy. Revisit your entries, exits, or risk management before risking capital.
- How is Kelly different from fixed percentage risk?
- Fixed percentage risk (e.g., always risk 2%) ignores your edge. Kelly adjusts position size based on your actual win rate and reward-to-risk ratio. A stronger edge means a larger Kelly %, while a weak edge means a smaller one. Kelly is mathematically optimal; fixed percentage is simpler but less efficient.
- What inputs do I need to calculate Kelly?
- You need three numbers: your win rate (percentage of winning trades), your average win (dollar amount per winning trade), and your average loss (dollar amount per losing trade). These should come from a trading journal with at least 30-50 trades for reliable estimates.
- Why do most traders use Half Kelly or Quarter Kelly?
- Full Kelly assumes your edge estimate is perfectly accurate, which it never is in practice. Estimation error in win rate or average win/loss can lead to overbetting. Half Kelly gives roughly 75% of the growth rate with much smaller drawdowns. Quarter Kelly is even more conservative and is common among professional fund managers.
Related Tools
Position Size Calculator
Apply Kelly % to calculate exact position size
Risk of Ruin Calculator
See probability of account blowup at this risk level
Stop Loss / Take Profit Calculator
Plan stop loss and take profit levels for any trade
Breakeven Calculator
Find minimum win rate needed to profit
Not sure which sizing method to use? Compare Position Size vs Kelly Criterion →
Want the bigger picture? See the full risk management framework →