Kelly, Jr. This formula determines the optimal % of your account that you can bet to get the most profitable outcome in the long run. whereKelly Criterion Calculator. rr: float, reward to risk. Although it may appear confusing, it’s actually pretty simple. It is a simple formula that calculates the proportion of your balance to wager on a particular gamble. In current times, the Kelly Criterion is used in a similar purpose for investors around the world. Laying the same outcome at 2. The Kelly Criterion calculation is used to calculate the optimum stake or position size for a given event, and is made up of four factors. Users of the betting exchange versions of the calculator can enter the back and/or the lay odds. The exact formula for optimal bet size based on the Kelly formula is: f* = (bp – q)/b. The Kelly Criterion is a mathematical formula that helps gamblers determine optimal bet sizes and maximize profits. How to use the Kelly Criterion to manage money based on your stock trade history. I start trading a mean reversion strategy with a 70% win rate, and $200 risked per trade. Make your sports betting experience easier with our Kelly Criterion calculator, learn about the Kelly Criterion and how much you should wager to maximise your profits! Get Our. One simply produce a probability and severity gradient while the other is actually an adjusted KC that limits drawdown (but also limits optimized return profiling). Strategy): def __init__. So, you first need to determine your bankroll size and the. Penn Entertainment disclosed its third quarter trading update, reporting an overall revenue of $1. Allocate capital using Kelly criterion, modern portfolio theory, and risk parity. where: K – optimal % risk. The probability of winning, and the probability of losing. I risk 2k. The Kelly percentage is calculated using: The Win Ratio (W): This is the probability of a trade having positive returns. ” In the more common cases, the value that solves for the Kelly Criterion is not the optimal “fraction” of a trading account to risk. 00 returns a total of $300, including the proposed stake. g. Kelly Criterion. I want to calculate the Kelly bet for an event with more than. Gamblers use this percentage to. That is a probability of winning of 40%. 67 = 37. When the account value changes to $8,000 or $12,000, you will use $4,800 and $7,200 respectively for the. Losing the first bet and winning the second will lose $4 more. I'm curious if anyone has. 25%. Mathematical formulation ; Monte-Carlo simulation. The required calculation would be as follows. Never Go Full Kelly. It is the probability of the anticipated wager winning. 1. Euan Sinclair has some great stuff on how we can modify KC in his latest book, positional options trading. The Kelly Criterion is an incredibly fascinating and useful method to use to arrive at the amount of money you should bet or invest. We’ve taken our years of industry experience, both from working at sports books and being sports bettors and created Action Backers to help turn you into a more savvy and profitable sports bettor. if anything, it. Disclosure. This results in a negative edge, meaning you will lose money on average every time you place this. The Kelly Criterion: A mathematical formula relating to the long-term growth of capital developed by John Larry Kelly Jr. e. Open ZERO Brokerage FREE Share Trading Account - Buy and Sell Stocks Without Brokerage - Set Good Till Cancelled (GTT) on System and Forget. The Kelly criterion is otherwise called Kelly bet, Kelly formula, and the Kelly strategy. Where: f* = fraction of bankroll to bet. Graph functions, plot points, visualize algebraic equations, add sliders, animate graphs, and more. You have to remember that the basic Kelly Criterion formula is meant to optimize bets for black-and. That is, he wanted to find (for each market system) an optimal number of contracts or lots, which should be traded with a certain account balance in order to maximise the capital growth. Based on the Kelly criterion, K% = (1 × 0. . The trouble is that the financial market is a continuous flow and does not follow this model. significant leverage) or more for a position. The literatures show the. Example of the optimal Kelly betting fraction, versus expected return of other fractional bets. The Kelly formula is : Kelly % = W – (1-W)/R where: • Kelly % = percentage of capital to be put into a single trade. Let XIt causes that the position size is hard to be estimated by the Kelly criterion. Even if using 20% of an ever decreasing account balance never blows out your account completely, this is not smart trading. a. The problem with this is that KC completely upends this. The second is the total win loss ratio, which is made up of the total number of winning trades divided by the total number of losing trades. Kelly Criteria and the Kelly Formula. B – payout on the bet. The Kelly criterion is the bet size that will produce the greatest expected growth rate in the long term. Euan Sinclair has some great stuff on how we can modify KC in his latest book, positional options trading. 67%. loss of entire bankroll). Parameters: win_p: float, probability of winning. A. Take Profit (%): Stop Loss (%): Portfolio ($): CalculateThe Kelly Criterion is a formula to determine the proper size of a bet with known odds and a definite payout. After retiring from being a pharmacist, Verma decided to apply his statistical edge in sports betting to the markets. ) 2) Reward per Dollar Risked: Enter the amount of capital your strategy, on average, profits. November 05, 2017 / 11:09 AM IST TradeCalculates theoretical hold including sports betting exchange commissions based on an Excel range of US or decimal odds. Kelly Criterion maximizes the wealth in the long-run. Suppose you run a trading portfolio and you know your past trading historical performance. Learn, create, implement and backtest various position sizing techniques such as Kelly, Optimal f, and volatility targeting on a trading strategy. Written. I'm sure many others will find. Kelly Percentage = W – [(1 – W) / R] W - Winning probability; R - Win/loss ratio; With your trading records, you can calculate your winning probability and win/loss ratio easily. Economic Data; Blueprint; My Service. Zenios and W. Folks in the trading world also like to think 30-trades are meaningful in terms of calculation Kelly. A win/loss ratio is self-explanatory, you can calculate it by dividing. The Kelly Criterion tells you the position sizes you should be taking on your next trade. The Kelly Criterion is to bet a predetermined fraction of assets, and it can seem counterintuitive. e. Kris Verma is a statistician of sorts. 14. . ” Kelly Multiplier RoR can be calculated using the formula: Here’s an example: Suppose I have a $10000 account and I decide to risk 30% of it. 6 winning probability. 124 = 0. . ) Kelly criterion will maximize your (log) account if the maximum possible loss is exactly 100%. The Kelly Criterion bet calculator above comes pre-filled with the simplest example: a game of coin flipping stacked in your favor. Does apply kelly now give better results? If kelly value is say 44k. Kelly Percentage = W – [(1 – W) / R] W - Winning probability; R - Win/loss ratio; With your trading records, you can calculate your winning probability and win/loss ratio easily. In the report, the entertainment giant revealed it will be launching ESPN Bet on Nov. Kelly can be murder during a bad losing streak, so sports bettors often reduce the Kelly. The Kelly criterion is based on a trader’s history of at least 100 trades. Thorp: Beat the Dealer. Preventing big losses 2. 50. Abstract: We propose a framework of option trading strategy for the simple index futures trading. Point 4: Through the understanding of Betfair market analysis, form a market-oriented game analysis awareness. The Kelly Criterion isn’t perfect considering it doesn’t take into account our level of confidence for a given trade, however, it does give a really solid reference point. b = decimal odds – 1. The Kelly Criterion assumes that the purpose of your trade is to maximize your growth of capital, and will reinvest your winnings. It can then tell you the optimal amount. The Kelly formula is : Kelly % = W – (1-W)/R where: Kelly % = percentage of capital to be put into a single trade. If there is a fixed amount of bets the Kelly criterion will be suboptimal, but as the number of bets grows the optimal strategy will asymptotically reach the Kelly criterion. To use the kelly criterion reasonably in trading you will need to follow these steps: Access at least one sample of one hundred trades you have executed. , see: "The Kelly Criterion in Blackjack Sports Betting, and the Stock Market" [2]. Let’s calculate K for our scenario:Also know as a lay bet calculator. Maybe we’d rather not have optimal growth. But the formula works only for binary bets where the downside. Image source: Getty Images. The Kelly Criterion is comprised of two basic components. The Kelly bet is popular among big investors, including Berkshire Hathaway's Warren. May have to change the equation to get exactly like kellyBy the way, I took you through the formulas just so you could get a sense of how changes in rake or winning percentage alter your optimal plays, but you can and should use a Kelly Criterion calculator. A = 70% – 30% = 40% = 0. It became notorious among equities traders because it was said that Warren Buffet uses a version of it when he’s picking his investments. I built a super simple version of a Kelly Criterion calculator in Google Sheets if you want to make a copy and play around with it to get a feel for how it works. 67% of your account balance on a single trade. Where . 11 hours. 1. Both bets and trading positions deal with probabilities. 2. In this article, we will explore the Kelly Criterion in Forex trading and how it can be used to enhance your trading strategy. This simulation show us how, over a number n of bets, the optimal percentage of the total bankroll/portfolio to bet/invest is dictated by the Kelly Criterion, in this specific case 10. The Kelly Criterion is comprised of two basic components. L. 36%)-1 = -5. This is because, as explained later, the Kelly Criterion doesn’t produce an “optimal fraction to bet,” but rather a leveraging factor. This is where the Kelly formula comes into play: K = ( PxB – (1–P) ) / B. Calculate the relationship between risk and return R. You will have to fill in the required data and it will tell you your expected profit, expected growth of bankroll, expected bankroll amount and. The left-hand side of the equation, f*, is the percentage of our total wealth that we should put at risk. Suppose we have initial capital X 0 and we want to determine the optimal betting fraction f to invest each year in S&P 500 stocks. The Kelly Criterion gives an optimal result for betting based on the probability of winning a bet and how much you receive for winning. Edward O. This gives us a Sharpe Ratio of S = 0. 04. BLACK FRIDAY SPECIAL: Save 70% Off Nial Fuller's Pro Trading Course (Ends Nov 30th) - Learn More Here. To associate your repository with the kelly-criterion topic, visit your repo's landing page and select "manage topics. Position Sizing can make or break your trading results. Kelly Jr. 077 / 0. P – odds of winning. In the one asset two valued payo case, the optimal Kelly wager is the edge (expected return) divided by the odds. A = (Success % /. While this formula is great, it still only. 2. To practically apply the Kelly Criterion, investors can follow a systematic approach: Analyze past trading or betting data to identify the winning probability and win/loss ratio. the Kelly Criterion formula to calculate your stake. The standard kelly betting is 1. In this paper, we. KELLY CRITERION | Ed Thorp | Optimal Position Sizing For Stock TradingThe Kelly Criterion calculation was created by Ed Thorp and made specifically to beat t. The Kelly Criterion is a formula that produces the long-run optimal bet size, given the odds. ) 2) Reward per Dollar Risked: Enter the amount of capital your strategy, on average, profits. Jan 11 21, 15:44 GMT. From the recent events in the financial market correction, I thought it would be a fun time to talk about risk management. Contact. Consider how aggressive Full Kelly is, and if that's truly your risk appetite. The first of these is the probability of a positive outcome, or a winning trade. If your Optimal F is 18 percent, then each trade should be 18 percent of. The Kelly Criterion requires there are no other rules other than the Kelly Criterion. Information wants to be free. The intuition is that over multiple periods the geometric average return is. Most traders who do use the Kelly Criterion in their position sizing only trade half or quarter Kelly, i. The Kelly bet size is found by maximizing the expected value of the logarithm of wealth, which is equivalent to maximizing the expected geometric growth rate. John Larry Kelly, Jr. The Kelly Criterion is a formula used to bet a preset fraction of an account. Please, remember, the game started. The formula for the Kelly Criterion can be written as: Kelly% = W – [ (1-W) / R] Where: W = Winning probability factor (the probability that the result of the trade will be positive) R = Win/Loss Ratio (the total positive trade sums divided by the total negative trading sums)In plain English, the Kelly criterion says: Bet bigger when your edge is bigger and your chance of winning is higher, but bet less when your edge is smaller and your chance of winning is lower. Four staking plans are compared: full-Kelly, half-Kelly, quarter-Kelly and eighth-Kelly. The Real Kelly) discussed in this @Pinnacle article The Real Kelly. By using the Kelly criterion formula, you can make informed decisions about the optimal size of your bets or investments to maximize long-term growth. With its gambling origins, does the Kelly Criterion have any application in the trading world? Let’s put it to the test!🔴 Use StrategyQuant to automatically. 00. There is a 60% chance of a winning a coin flip. Put simply, the Kelly Criterion or Formula is a way to calculate how much of their assets a Forex trader should risk on any given trade in order to maximize the return. Given a bank roll, a stake you have already bet and a potential pot of winnings, the Kelly Criterion should calculate for you the optimal amount you should bet to maximize your winnings in the long run. 3 – [ (1 – 0. Follow. ” Kelly MultiplierFollow these steps to determine your optimal bet stake using the Kelly Criterion:1. so basically Kelly is exactly what I wrote above, and then then exp/log and end up maximizing the mean of the $log(1 + f u)$ in the exponential. 8 million during the three months leading to Sept. 16 would guarantee only a very small overall loss. 50 = -0. In this case, the Kelly Criterion calculator recommends that you use 2. 77 = $91. Kelly in his famous article on the. 20. R (win/loss ratio) is calculated as the average gain (4600) divided by the average loss (2950), resulting in. 1142/7598 Google Scholar; Markusson, O. The Kelly Criterion is 6. 5%. Folks in the trading world like to complain about Kelly or Optimum-f being too risky. 0003%. How to develop a good trading strategy to achieve long-term stable profit is the dream of many people []. Ralph Vince wanted to improve the Kelly formula for trading and calculate mathematically what amount should be put into a trade depending on the expected yield. Apologies, but something went wrong on our end. In this analysis, we delve into the Kelly Criterion strategy and its applicability to optimizing trading and investment endeavors for maximal growth. Kelly Criterion, works by looking a traders historical win/loss and gain/loss performance and optimizes the next trade risk basis on overall performance history. Kelly % = trading capital to use in one trade. W = Historical winning percentage of a trading system. W = Historical winning percentage of a trading system. Business, Economics, and Finance. The Kelly criterion is a theoretical formula for obtaining the best return when repeatedly investing money. What is the Kelly percentage? Basically, the Kelly percentage provides information on how much one should diversify. More precisely, for the case of one stock modelled with geometric Brownian motion, one obtains a Kelly frac-Keywords: Kelly criterion Optimal fraction KL-divergence 1 Introduction Financial trading is an interesting research issue to many experts and scholars. Using kelly: 119 * 1. * R = Historical Average Win/Loss ratio. The Kelly Criterion. Kelly came up with a betting system which optimizes bankroll growth based upon known odds and a definite payout. The report. 0003%. as I said, I only do 2 tables at most, so its not a problem. For the purposes of this. When you deploy a percentage of your total capital into a trade, you are using the fixed percentage method of position sizing. To calculate the “R,” divide the average. Compared with prior studies, they argued. The Kelly Criterion Model advances unit betting to the next level. addition to trading signals, a suitable trading strategy is also crucial. According to Kelly criterion, we find the most profitable option strike price for buying side and calculate the optimal lots of option for position size. Refresh the page, check Medium ’s site status, or find something interesting to read. In the stock market, money is invested in securities that have high expected return [3]. That is, he wanted to find (for each market system) an optimal number of contracts or lots, which should be traded with a certain account balance in order to maximise the capital growthKelly's Criterion Bet Size Calculator Here's a spreadsheet to play around with the above equation and calculate optimal bet sizes. John Larry Kelly Jr. The Kelly criterion, which was first introduced by John R. Or, regretted trading in a small quantity in a high-performing trade? In both cases, position sizing could have helped by: 1. Optimal Position Size with Fractional Kelly Criterion to Maximize Trading Account Growth. In this section, we propose an option trading model, which better fits the usage of the Kelly criterion. Kelly Criterion. 67 billion is largely attributed to Wynn Resorts’ Macau operations. The other is the lot size will show at the bottom. We explain how it works, and discuss its advantages and disadvantages. Kelly Criterion Calculator Kelly Criterion Calculator The Kelly criterion is an advanced money management method that helps traders determine what proportion of their trading capital should be invested in a particular position. If you decide on 1%, you are betting $10 for a $1000 bankroll. The formula is as follows: f = the fraction of the bankroll to bet. Many traders enjoy trading independently because they can see the direct fruits of their labor. My RoR is thus 0. 52 q=0. The trade will based on the most profitable option portfolio. , a researcher at Bell Labs, in 1956. Here are the steps that you have to follow in order to use our Kelly Criterion Calculator: Add your current betting balance in the cell called “Current Betting Balance”. Kelly applied to Option Investing While stock investments are more free-form, many option investments have common ground with gambles: • fixed terms • a definite time horizon • a payoff settlement at expiration Hence with the proper statistics, we can use the Kelly criterion to determine optimal investment levels whileSimply writing something off is not my style. The Kelly Criterion is a formula invented by J. In such a case, the Kelly criterion suggests that if one were to go over 20% repeatedly on a low. the Kelly Criterion to the stock market. We do this by maximizing the median outcome with respect to the size of our bet, ℓ. However, it’s important to remember that the Kelly criterion is not a one-size-fits-all. ℓ = 2 ( p − 0. 40. With 5 total trades and 3 profitable ones, W (winning probability) equals 3/5 or 0. 00 returns a total of $300, including the proposed stake. The picture above has 2 simulations of betting at 20%, 50%, and 75% and 4 at the Kelly Criterion amount. Figure 9. The approach underlying the calculation takes into account the performance of previous trades. The Kelly Criterion is a mathematical formula that helps gamblers determine optimal bet sizes and maximize profits. One simply produce a probability and severity gradient while the other is actually an adjusted KC that limits drawdown (but also limits optimized return profiling). The strategy is prevalent and is used as a revered staking plan among stock market investors and sports bettors to gain an edge. You enter the Kelly adjustment into D6. - Kelly Criterion - Historical performance based risk Option Trading Tools: - Covered Calls - Buy stock. Search for jobs related to Kelly criterion calculator or hire on the world's largest freelancing marketplace with 23m+ jobs. (1923 – 1965) Developed the Kelly Criterion, a formula to proportion bets based on a disparity between given odds and true odds. Two simple components make up the Kelly Criterion, the first is the probability that a trade you make will return positive winnings – and the second is the win/loss ratio. Jan 11 21, 15:44 GMT. Specifically, we’ll go over the Kelly Criterion with a concrete example in…. 's formula described in "A New Interpretation of Information Rate" [1]. , which relates to the long-term growth of capital. 71% of your capital, or $57. Some clarifications: I am writing software for a mechanical trading system. The Kelly Criterion is a money management formula that calculates the amount you should bet when there is a difference between the “true” odds and the given odds. The Kelly Criterion is 6. 5% and 1/8 1. the kelly criterion helps with the decision of how much one should invest in a asset as long as you know the odds and expected return of said asset. Best Betting Sites We Recommend for the Kelly Criterion in Betting 2023. I risk 2k. Four staking plans are compared: full-Kelly, half-Kelly, quarter-Kelly and eighth-Kelly. Here is a range of useful trading calculators I made up in an excel spreadsheet, it includes: Simple and advanced money management, trade cost, trade accuracy, kelly criterion, consecutive losses, growth projections, monthly turnover volume, pip value, and account cumulative profit/loss percentages. L. Let’s calculate K for our scenario: Dutching Calculator - Know Your Stakes Quickly - Dutching Calculator tells you how much to stake on each selection to ensure an equal profit no matter which one wins, also known as the Dutching System. Take Profit (%): Stop Loss (%): Portfolio ($): Calculate The Kelly Criterion is a formula invented by J. Kelly Criterion Calculator Excel. It helps calculate the optimal amount one should place on a bet or an investment. Kelly’s Criterion which helps telecom companies with long distance telephone noise issues was proposed by John Kelly in the 50’s. rr: float, reward to risk. Inside you will find the resources and guidance you need to. Kelly Jr. 3. b = the decimal odds – 1. e. Explain the CAPM and the Fama-french framework. 0. p. How to Use the Kelly Criterion. It’s doable. 1 Author by Vilhelm Gray. " David P. You should. Conclusion. Trading with the Kelly criterion. After backtesting this, say it gerates 60% win. Figure One: The growth rate (G(f)) of the bankroll for the case p=0. To calculate the “R,” divide the average. b = the decimal odds – 1. This is where the Kelly formula comes into play: K = ( PxB – (1–P) ) / B. 5) ell = 2 (p - 0. Bettors can also modify the Kelly formula to suit their needs and tolerance to risk. The problem with this is that KC completely upends this. Since the variance in heads up will always be 1 than the formula is easily applicable to HU SNGs. It can then tell you the optimal amount you should invest in each trade, given the strategy and your personal forex trading record. 50, to place your wager. Therefore, your probability is . Analyse how the performance of the strategy changes after applying these position sizing techniques. It was found that the formula, which has a gambling background and helps to determine the optimal bet size, can also help with finding the ideal investment size. He gives lectures to various institutions including The World Bank, Carnegie Mellon, and billion-dollar hedge funds. Comments. Usually, the bigger your edge on the odds the more you should bet but Kelly also takes into account the real chance of that bet winning and Kelly would advise a smaller bet for a 5% edge at even money (2. Kelly was a research scientist at Bell Labs. Kelly is a very aggressive investment strategy. 4. If you need a convenient risk calculator for your trading, I can recommend this app. 5). Handbo ok of Asset and Liability Management, Volume 1, Edite d by S. That is, put them at risk in the future. Kelly Criterion Calculator - Know Your Stakes Quickly - Kelly Criterion determines how much of a stake you should risk on a favorable bet, is a popular staking method which suggests that your stake should be proportional to the perceived edge. Kelly Criterion Calculator To see the formula in action, lets take an example of a football match where the odds available on the draw are 3. I have a few calculators I use to do this. 0) than a 5% edge at 1/3 (1. 067 or 6. Does apply kelly now give better results? If kelly value is say 44k. Thus the Kelly leverage. It is calculated as a ratio of profitable trades to total trades. ie Full Kelly where there is any uncertainty is not optimal! They then go on to describe (in their model) how to find the correct "shrinkage coefficient" (what I call α) as a function of uncertainty; α = (p−q)2 (p−q)2+σ2 = SR2 SR2+1. The simultaneous events Kelly calculator is a tool that punters can use to calculate how much they should increase their bankroll by betting on a series of events, using the Kelly criterion formula. By using the Kelly criterion formula, you can make informed decisions about the optimal size of your bets or investments to maximize long-term growth. Since there is not a nite number of outcomes of a bet on a security, we must use continuous probability distributions. The formula is therefore suggesting that 20% of the portfolio be stake 20% of your bankroll. g. These numbers are identical only in the “special case. com Make your sports betting experience easier with our Kelly Criterion calculator, learn about the Kelly Criterion and how much you should wager to maximise your profits! Get Our FREE Betting Calculator App Results The odds are in your favor, but read the following carefully: According to the Kelly criterion your optimal bet is about 5. To calculate the optimal bet size use Kelly's criterion. The investor would calculate the efficient frontier as above, but when calculating the median return could use a simulation-based set of returns at the horizon. Calculate the relationship between risk and return R. Secondly, you can calculate the amount of total capital allocation for each deployed trading algorithm, essentially treating each algorithm as a fund. p. This is how the simplified Kelly looks. * W = Historical winning percentage of a trading system. , and is analogous to the one in Fortune’s Formula: Kelly % = edge/odds. at Bell Labs in 1956, the Kelly criterion formula has long been established to provide a potent equation to calculate the optimum level of risk for placing a bet in a probabilistic types game like sports betting or blackjack. No-Vig Fair Odds Calculator. It was described by J. It was found that the formula, which has a gambling background and helps to determine the optimal bet size, can also help with finding the ideal investment size. Kelly himself was an interesting character: a chain smoking Texan who used to be a fighter pilot in the Navy during World War 2, he was also brilliant. Generally, the Kelly criterion is a formula that maximizes the expected value of the logarithm of wealth that is equivalent to maximizing the expected long-term growth rate. Ultimately, the Kelly Criterion formula calculates the perceived edge you have. s = b * (o. Optimising profit potential. The amount won is $200 or multiple of the odds based on the stake. Use the Kelly Criterion to identify the mathematical optimum amount of capital which you should alloc. Insane. A formula called the Kelly Criterion solves just this problem. If you’re extremely confident in a trade, consider sizing up to your K%, (5 -. This gives us a Sharpe Ratio of S = 0. After backtesting this, say it gerates 60% win. Unsurprisingly, the volatility or variance in the evolution of the bankroll is greatest for full-Kelly and least for eighth-Kelly. Risking 2% does not mean buying with 2% of capital. Stock Trading tools and resources. Odds The odds offered by the bookmaker or exchange. 99 Losses using this model: 119 - 12. py, the app adopts a mathematical approach to investment sizing. We hope this skill can be applied to any futures trading strategies by using option buy-side. Ranking among the top-performing. This episode will give an example for appl… Show Stock Market Options Trading, Ep Kelly Criterion For Position Sizing Credit Spreads -. The formula was adopted to gambling and stock market by Ed Thorp, et al. Sizing an investment according to the Kelly criterion can theoretically yield the best results. e. 1. It consists of kelly divided by max loss. For obvious reasons, if your sports betting bankroll is, say, $5,000, you should not stake it all on one bet, regardless of how great you think the bet is. Full Kelly has an interesting property: there is an X% chance of your bankroll dropping to X% of what you started with 5. 8% stake really just means you are betting 7. The Kelly bet size is found by maximizing the expected geometric growth rate. However, unlike in the previous situation we examined the Kelly Criterion for, there is not a nite number of outcomes of a bet on a security, so, we will use The Kelly Criterion is straightforward to calculate: you only need two inputs to determine the optimal betting size: The win/loss ratio – the win percentage of your trading strategy (R) (dividing the total gains of the winning trades by the total loss of the losing trades) The win ratio of the trading strategy (W) (the number of trades that.