Kelly Criterion — Optimal Bet Sizing, Handle With Care
7/6/2026
risk-management
guide
Kelly computes the growth-optimal fraction to risk given your edge: f = W minus (1-W)/R.
Level by level
Beginner
With no edge Kelly says ZERO — the formula's first gift is telling you when not to play.
Intermediate
Full Kelly is violently volatile (50-percent-plus drawdowns are expected). Practitioners use half or quarter Kelly for most of the growth at a fraction of the pain.
Advanced
Your W and R inputs are estimates with error bars; overestimating edge over-bets catastrophically. Recompute from your journal's last 50+ trades, never from hope.
Common mistakes
- Using Kelly with guessed win rates
- Running full Kelly with rent money
Practise & tools
_Educational content only — not financial advice. Historical behaviour never guarantees future results._
Keep learning — free tools