Kelly Criterion Calculator
Calculate the mathematically optimal position size based on your win rate and reward-risk ratio.
Global broker with 18 years of history, regulated in 6 jurisdictions with multiple platform options including MT4, MT5, and AvaOptions.
Advantages
- Regulated in 6+ jurisdictions
- 15+ years operational history
- Multiple platform options
Free account • No deposit required
Social trading platform for beginners and copy traders
Advantages
- Dead simple copy trading
- Massive community
- $50 minimum deposit
Free account • No deposit required
High leverage crypto and forex trading
Advantages
- Ultra-low spreads
- High leverage options
- Crypto and forex combined
Free account • No deposit required
Fast execution and ultra-competitive spreads
Advantages
- Genuine 0.0 pip spreads on Premium accounts
- Sub-50ms execution speed verified
- Modern proprietary platform + cTrader
Free account • No deposit required
Risk Warning: Trading forex and CFDs involves significant risk of loss and may not be suitable for all investors. 74-89% of retail investor accounts lose money when trading CFDs. These are affiliate links - we may earn a commission at no additional cost to you. Please ensure you fully understand the risks and seek independent advice if necessary.
Quick answer
The Kelly Criterion gives the growth-optimal fraction of capital to risk: f = W − (1 − W) ÷ R, where W is your win rate and R is your payoff (reward-to-risk) ratio. Most traders use half- or quarter-Kelly to reduce volatility and drawdowns.
What is the Kelly Criterion Calculator?
What Is the Kelly Criterion Calculator?
The Kelly Criterion Calculator determines the mathematically optimal percentage of your trading capital to risk on each trade for maximum long-term growth. Developed by John Kelly at Bell Labs in 1956, this formula has been adopted by professional gamblers, hedge funds, and systematic traders to optimize position sizing based on edge and odds.
Unlike arbitrary position sizing (risking 1% or 2% "because it's popular"), the Kelly Criterion uses your actual win rate and reward-to-risk ratio to calculate the exact percentage that maximizes compound growth while minimizing ruin probability. It's the mathematical answer to "how much should I bet?"
The Kelly Formula
Kelly % = W – [(1 – W) / R]
Where:
- W: Win probability (e.g., 0.55 for 55% win rate)
- R: Win/Loss ratio (average winner ÷ average loser)
Alternative formula: Kelly % = (BP – Q) / B where B = odds received, P = win probability, Q = loss probability (1-P)
Why Kelly Criterion Matters
- Maximum Growth: Mathematically proven to maximize long-term capital growth
- Prevents Over-Betting: Shows when aggressive position sizing destroys returns
- Prevents Under-Betting: Reveals when conservative sizing leaves profits on the table
- Edge Quantification: If Kelly is negative, you have no edge—don't trade
- Professional Standard: Used by Renaissance Technologies, Warren Buffett, and professional sports bettors
How to Use This Calculator
How This Calculator Works
Step-by-Step Guide
- Calculate Win Rate: Review your last 100+ trades and determine winning percentage
- Calculate Win/Loss Ratio: Divide average winning trade by average losing trade
- Input Values: Enter win rate (as decimal or percentage) and R:R ratio
- View Full Kelly: See the mathematically optimal position size
- Apply Fractional Kelly: Most traders use Half-Kelly (50%) or Quarter-Kelly (25%) for reduced volatility
Understanding the Output
- Positive Kelly: You have a mathematical edge. The percentage shown is your optimal risk.
- Zero Kelly: Your strategy breaks even. No edge exists—do not trade.
- Negative Kelly: You have a negative edge. Trading this strategy guarantees losses over time.
Real-World Example
Real-World Examples
Example 1: Trend Following Strategy
- Win Rate: 40% (trend strategies often have low win rates)
- Win/Loss Ratio: 2.5:1 (winners are 2.5x larger than losers)
Kelly Calculation:
Kelly % = 0.40 – [(1 – 0.40) / 2.5]
Kelly % = 0.40 – [0.60 / 2.5]
Kelly % = 0.40 – 0.24 = 0.16 (16%)
Full Kelly suggests risking 16% per trade. Half-Kelly = 8%, Quarter-Kelly = 4%. Most traders would use 4-8% with this edge.
Example 2: Scalping Strategy
- Win Rate: 70%
- Win/Loss Ratio: 0.8:1 (small winners, larger stop losses)
Kelly Calculation:
Kelly % = 0.70 – [(1 – 0.70) / 0.8]
Kelly % = 0.70 – [0.30 / 0.8]
Kelly % = 0.70 – 0.375 = 0.325 (32.5%)
High win rate allows aggressive sizing. However, 32.5% per trade creates extreme volatility—Half-Kelly (16%) or Quarter-Kelly (8%) is safer.
Example 3: Breakeven Strategy (No Edge)
- Win Rate: 50%
- Win/Loss Ratio: 1:1
Kelly Calculation:
Kelly % = 0.50 – [(1 – 0.50) / 1]
Kelly % = 0.50 – 0.50 = 0% (Zero Edge)
Kelly of 0% means no edge exists. Trading this strategy at any position size results in long-term breakeven (minus costs = slow losses).
Example 4: Negative Edge (Don't Trade)
- Win Rate: 45%
- Win/Loss Ratio: 1:1
Kelly Calculation:
Kelly % = 0.45 – [(1 – 0.45) / 1]
Kelly % = 0.45 – 0.55 = -0.10 (-10%)
Negative Kelly means you're expected to lose money over time. Every trade reduces your account. Do NOT trade this strategy—improve win rate or R:R first.
When to Use
When to Use This Calculator
- Position Sizing Optimization: Replace arbitrary 1-2% risk with mathematically optimal sizing
- Strategy Validation: If Kelly is negative or zero, your strategy needs improvement before trading
- Comparing Strategies: Higher Kelly percentage indicates a stronger mathematical edge
- Scaling Up: When increasing account size, Kelly helps determine how aggressively to compound
- Risk Tolerance Calibration: Use Fractional Kelly to match position sizing to your psychological comfort
- Prop Firm Optimization: Calculate maximum position size that keeps drawdown within firm limits
Common Mistakes
Common Mistakes to Avoid
- Using Full Kelly: Full Kelly is mathematically optimal but creates extreme volatility (50%+ drawdowns). Most professionals use Half-Kelly (50%) or Quarter-Kelly (25%) for reduced volatility.
- Overestimating Win Rate: Kelly is highly sensitive to inputs. A 55% win rate vs. 50% win rate dramatically changes the output. Use conservative, verified statistics.
- Ignoring Transaction Costs: Kelly doesn't account for spreads, commissions, and slippage. Your real edge is lower than raw win rate suggests—adjust accordingly.
- Small Sample Size: Calculating Kelly from 20 trades is statistically meaningless. You need 200+ trades to estimate true win rate and R:R with confidence.
- Assuming Static Edge: Markets change. An edge that produced 60% win rate last year might produce 50% this year. Recalculate Kelly quarterly.
- Applying to Every Trade: Kelly assumes you know the exact odds for each bet. In trading, odds vary by setup quality. Use Kelly as a maximum, not a fixed rule.
Use Together With
Risk of Ruin Calculator
Assess the probability of losing your entire account based on your trading statistics.
Position Size Calculator
Calculate the perfect position size for your trades based on your account size, risk tolerance, and stop loss distance.
Risk-Reward Calculator
Determine your risk-reward ratio and the minimum win rate needed for profitability.
Compound Interest Calculator
Project your trading account growth over time with the power of compound interest and consistent returns.
Frequently Asked Questions
Related Calculators
Tools that work best with the Kelly Criterion Calculator
Risk of Ruin
Free risk of ruin calculator for forex. Assess the probability of blowing your account based on win rate, risk-reward ratio, and position size. Uses standard RoR formula.
Position Size
Free forex position size calculator. Enter your account balance, risk percentage, and stop loss to get the exact lot size. Works with all currency pairs, MT4, and MT5.
Risk-Reward
Free risk-reward ratio calculator for forex. Enter entry, stop loss, and take profit to see your R:R ratio and the minimum win rate needed to be profitable.
Compound Interest
Free compound interest calculator for trading. Project your account growth over time with consistent periodic returns. Includes interactive growth chart and data table.