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Kelly Criterion Position Sizing Calculator

Use quantitative probability equations to determine exactly what percentage of your bankroll to allocate.

Stop guessing how much to bet. The formula professional gamblers and quantitative hedge funds use is right here.

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Eliminating The Gambler’s Fallacy

This is the exact mathematical formula used by professional quantitative traders over standard subjective position sizing.

Kelly % = W - [ (1 - W) / R ]

Where:

  • W is the historical win probability (the percentage of trades you actually close green).
  • R is the win/loss profit ratio (your Average Dollar Win divided by your Average Dollar Loss).

How it’s used

You simply plug in your tracked, historical trading data.

Why it matters

It completely eliminates emotional over-leveraging and FOMO. The formula mathematically calculates the maximum growth rate of your bankroll over an infinite timeline while simultaneously minimizing the absolute risk of total ruin.

It dictates the ceiling on what percentage of your capital to allocate. In reality, massive hedge funds often trade what is called a “Half-Kelly” fraction to further minimize volatility drawdowns while securing guaranteed long-term geometric compounding.

Frequently Asked Questions

The Kelly Criterion is a mathematical formula that determines the optimal size of a series of bets based on the known odds of winning and the size of the payout.
If the formula yields a negative number or 0%, it mathematically proves that your strategy does not currently possess an edge over the market. It expects you to lose money long-term, so your bet size should be $0.

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