How do I calculate the Kelly criterion?

The Kelly fraction is f* = p − (1 − p) ÷ b, where p is your probability of winning and b is the payoff odds — the net amount won per unit risked. If you know your average win and average loss instead, set b = average win ÷ average loss. A result of zero or below means the formula sees no positive edge, so it suggests staking nothing.

Why do traders use half-Kelly or quarter-Kelly instead of full Kelly?

Full Kelly maximizes long-run growth only if your win probability and odds are known exactly, which they never are. It is also brutally volatile, producing deep drawdowns. Overestimating your edge causes full Kelly to over-bet you toward ruin, so many practitioners use a fraction — half-Kelly or quarter-Kelly — to cut the swings and the damage from estimation error, giving up a little growth for much lower risk.

What is the Kelly criterion used for?

Introduced by John Kelly in 1956, it is a position-sizing rule that scales your stake to your edge to maximize the long-run compound growth of capital. Its core discipline is defensive: it never tells you to stake an amount that could wipe you out, because you cannot compound from zero.

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Kelly criterion calculator

The Kelly fraction tells you what share of your capital to stake to maximize long-run growth: f* = p − (1 − p) ÷ b, where p is your win probability and b is the payoff odds. Most people bet a fraction of it.

Win probability (%) How do you know your odds?

Payoff odds b (net won per unit risked)

Bankroll ($) — optional, to convert to a dollar stake

What the Kelly criterion is

Published by John Kelly in 1956, the Kelly criterion is a position-sizing rule that scales your stake to your edge. Bet more when your edge is larger and more certain, less when it’s thin — and, crucially, never so much that a losing streak could wipe you out. Followed exactly, it maximizes the long-run compound growth rate of your capital.

f* = p − (1 − p) ÷ b

Here p is your probability of winning and b is the payoff odds — the net amount you win per unit risked (so risking $200 to make $300 is b = 1.5). If the formula returns zero or a negative number, it’s telling you there’s no positive edge to bet on.

In practice almost nobody bets full Kelly. Your inputs — win probability and odds — are estimates, and full Kelly assumes they’re exact. It’s also extremely volatile: overestimate your edge and full Kelly over-bets you into deep drawdowns. That’s why seasoned users apply fractional Kelly — half or a quarter — trading a little long-run growth for much smaller swings and a buffer against estimation error. See the Kelly criterion glossary entry and our note on turning conviction into a position size for more.

Illustrative math on the estimates you enter — real edges are uncertain and this is not a recommendation to bet any amount. Educational tool, not financial advice. Your figures never leave the page — the calculation runs entirely in your browser. The page loads standard pageview analytics, which never sees your numbers.

This math stops at what you typed in.

Tradune runs it continuously on your real holdings — with your money-weighted return next to a buy-and-hold SPY twin, and SEC insider filings flagged on the stocks you own.

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Educational analytics — not investment advice.

Portfolio risk analysis Position-size calculator Kelly criterion Position sizing: conviction to a number

Kelly criterion calculator

What the Kelly criterion is

This math stops at what you typed in.

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