The Kelly criterion

The maths of bet size - and why pros use a fraction

Professional - Gold & Platinum

In this lesson

Calculate the Kelly fraction from win rate and payoff, and understand why professionals bet a fraction of it.

Key takeaways

Kelly fraction = W − (1 − W) ÷ R (W = win rate, R = average win ÷ average loss).
A zero or negative Kelly means there is no edge — don't bet.
Full Kelly gives very large drawdowns and is fragile to estimation errors.
Professionals use half or quarter Kelly as an upper limit, not a target.

Watch this lesson with Tessa. The full video, worked example, calculator, quiz and Ask Tessa are part of Money Globe X Gold and Platinum. Create your account to start learning.

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Educational information only - not financial advice.

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