Money management tools
Kelly Criterion Calculator
Work out the optimal risk per trade from your win rate and reward-to-risk ratio. Half Kelly and quarter Kelly are shown alongside the risk of ruin for each.
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Let the numbers cap your size
Result
Full Kelly (theoretical optimum)
0.00%
Half Kelly (recommended)
-%
Quarter Kelly
-%
Expectancy per trade
-R
-
-
-
Risk of ruin by Kelly fraction
| Fraction | Risk per trade | Amount at risk | Risk of ruin |
|---|
Ruin here means the account falling to 50% or less of its starting balance (Cramer-Lundberg method). The amount at risk appears once you enter an account balance.
Sensitivity to win rate and reward-to-risk
below 0% below 5% below 15% below 30% 30% or more The outlined cell is your current combination
How to read this result
Full Kelly
The theoretical figure that grows the account fastest. It turns against you sharply if the win rate comes in below expectation, so it is not a number to use as it stands.
Half Kelly
Half of full Kelly. It keeps most of the growth while cutting the drawdown, which is why it is normally treated as the upper limit in practice.
Expectancy (R)
The average gain per trade, expressed with one losing trade as 1R. Unless this is positive, the Kelly figure is negative too.
Method and specification
Main inputs
Win rate / reward-to-risk ratio (average win divided by average loss)
When to use it
Setting an upper limit for risk from backtest results / checking whether your current risk is too high
Assumptions and limits
A theoretical figure that assumes the win rate and reward-to-risk ratio stay as they are. It does not account for how losing streaks fall or for changes in spread.
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Frequently Asked Questions
What is the Kelly criterion?
A formula that gives the fraction of your account to risk per trade in order to grow it fastest, based on your win rate and reward-to-risk ratio. It is f* = win rate - (1 - win rate) / reward-to-risk ratio. With a 60% win rate and RR 2.0, for example, f* = 0.60 - 0.40 / 2.0 = 40%, which is full Kelly.
Why is half Kelly or less recommended?
Because full Kelly is only optimal if the win rate and reward-to-risk ratio hold exactly. In reality the win rate is an estimate, and even a small shortfall turns full Kelly into excessive risk. Half Kelly keeps well over two thirds of the growth while cutting the drawdown sharply, which is why practitioners stay at or below it.
Why is the Kelly figure negative?
Because when the expectancy is negative, the mathematically optimal bet is not to bet at all. With a 40% win rate and RR 1.0, f* = 0.40 - 0.60 = -20%. Trading smaller only slows the decline, so the method itself needs to be reworked.
What does the risk of ruin mean here?
The probability of the account falling to 50% or less of its starting balance. It is calculated with the Cramer-Lundberg method, which evaluates the paths the balance can take from the distribution of wins and losses. Below 5% is relatively safe, 5-25% warrants caution, and above 25% is dangerous.
How do I read the sensitivity heatmap?
Win rate runs down the side, reward-to-risk across the top, and each cell holds the full Kelly percentage. Find where your own method sits, then compare it with the neighbouring cells to see whether raising the win rate or raising the reward-to-risk ratio would help more.
Once your money management is settled, the next step is choosing an EA.
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