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Professional Risk Management · Lesson 5

The Kelly criterion

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

Professional - Gold & Platinum

The Kelly criterion

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 Nazli. The full video, worked example, calculator, quiz and Ask Nazli are part of Money Globe X Gold and Platinum. Join the waitlist for free lessons and your launch invitation.

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Educational information only - not financial advice.

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