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How to Use the Calculator
- Win rate: the share of your trades that end in profit, taken from your own record. The win rate calculator works it out.
- Average win and average loss: the typical size of a winning and a losing trade. Their ratio is the payoff.
- Account balance: the capital the stake is taken from.
- How much Kelly: full, half or quarter of the calculated stake.
How the Kelly Stake Is Calculated
The Kelly criterion gives the share of capital to put on each trade so that the account grows fastest over many trades. The stake equals (payoff × win rate − loss rate) ÷ payoff. The payoff is the average win divided by the average loss, and the loss rate is 1 minus the win rate.
For example, with a 50% win rate, an average win of $200 and an average loss of $100, the payoff is 2. Full Kelly is (2 × 0.5 − 0.5) ÷ 2, which is 25% of capital per trade. Half Kelly is 12.5%, or $1,250 on a $10,000 account.
How to Read the Result
- Edge: the expected profit per unit staked. If it is zero or negative, the Kelly stake is nothing: no position size makes a losing strategy profitable.
- Full, half and quarter: full Kelly gives the highest growth in theory. Half Kelly gives up about a quarter of that growth for roughly half the swings, which is why it is the common choice.
- Growth curve: the chart shows growth against the share of capital staked. Past the peak, staking more makes the account grow more slowly, and far enough past it the account shrinks.
What the Estimate Leaves Out
The formula assumes your win rate and payoff are known exactly and stay the same. In practice they are estimates from a limited number of trades. If the real edge is smaller than the one you entered, full Kelly stakes too much. Fees, slippage and several positions open at once are not modelled.
The profit simulator shows how a strategy plays out as a sequence of trades, and the drawdown recovery calculator shows what a losing streak costs to win back.