TC TradeCaliper

Kelly Criterion Calculator

Turn your win rate and payoff ratio into a position-size fraction — with half and quarter Kelly.

Full Kelly
32.50%
$8,125.00
Half Kelly
16.25%
$4,062.50
Quarter Kelly
8.13%
$2,031.25
Most traders use half or quarter Kelly — full Kelly is highly volatile.

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How to use it

Enter your win rate (the share of trades you win) and your payoff ratio (your average win divided by your average loss). The calculator returns the Kelly fraction — the percentage of capital to put at risk — plus the more practical half and quarter Kelly figures. Add your account size to see those fractions as dollar amounts.

The formula

f* = W − (1 − W) / R. With a 55% win rate and a 2:1 payoff, that's 0.55 − 0.45 / 2 = 0.325, or 32.5% of capital at full Kelly — 16.25% at half, 8.125% at quarter. The two inputs are estimates from your own trading history, so treat the output as a ceiling to fraction down from, not a precise instruction.

Why fraction it down

Full Kelly is the theoretical growth-maximizing bet, but it assumes you know your edge exactly. In real trading you don't — your win rate and payoff are noisy estimates — and full Kelly punishes over-estimation harshly with deep drawdowns. Half and quarter Kelly keep most of the long-run growth while making the ride far smoother and more forgiving of estimate error.

TradeCaliper is a planning and education tool, not financial advice.

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Frequently asked questions

What is the Kelly criterion?

The Kelly criterion is a formula for the fraction of your capital to risk on a bet or trade in order to maximize long-run growth. It balances the size of your edge against the risk of ruin: bet too little and you leave growth on the table; bet too much and volatility (or a losing streak) can wipe you out.

What is the Kelly formula for trading?

f* = W − (1 − W) / R, where W is your win probability (as a decimal) and R is your win/loss payoff ratio (average win ÷ average loss). The result is the fraction of capital to allocate. This calculator also shows half and quarter Kelly.

Why use half or quarter Kelly?

Full Kelly maximizes growth in theory but produces large account swings and is very sensitive to errors in your win-rate and payoff estimates — which are always uncertain. Fractioning down to half or quarter Kelly keeps most of the growth while dramatically cutting the volatility and the damage from over-estimating your edge. Most practitioners use a fraction.

What if the Kelly fraction is zero or negative?

A zero or negative Kelly means the inputs describe a losing proposition — there is no edge to bet on. The calculator clamps it to zero and tells you not to take the trade.

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