Kelly criterion calculator (full and fractional)
The Kelly criterion, derived by John L. Kelly Jr. in 1956, returns the bet fraction that maximises long-run logarithmic wealth growth. For a binary outcome with win probability p, win amount W and loss amount L (both positive), Kelly = p/L − (1−p)/W. Most professionals use half-Kelly or quarter-Kelly because full-Kelly delivers extreme drawdowns even with a known edge.
How to use
- Enter win rate
As a decimal (0.55 = 55% wins).
- Enter average win and loss
In R-multiples (1R = your fixed unit risk).
- Pick a Kelly fraction
Full, half or quarter.
- Read the result
Drogo returns the recommended position size as % of equity.
Frequently asked questions
- Why fractional Kelly?
- Full Kelly maximises long-run growth but produces brutal drawdowns. With 50% win rate and 1:1 R:R, full Kelly is 0% — there is no edge. Even a 60/40 edge with 1:1 sizes 20% per trade at full Kelly, which routinely produces 50%+ drawdowns.
- Does Kelly assume independent trades?
- Yes — Kelly assumes IID outcomes. In real markets, trades are correlated (regimes), so empirical Kelly should be reduced further.
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