Kelly criterion calculator
Updated
The market says one number and you think another. Kelly turns that disagreement into a position size: the fraction of a bankroll that grows it fastest over many bets. For a contract that pays $1 it is simply (your probability − the price) / (1 − the price).
Kelly criterion calculator
- Your edge
- 20.0%
- expected profit per $1 staked
- Full Kelly
- 20.0%
- of the bankroll
- A winning share pays
- $2.00
- +100 in American odds
Most people stake a fraction of full Kelly, because full Kelly is the size that maximises growth and not the one that survives being wrong about your own probability.
- Full Kelly $2000.00
- Half Kelly $1000.00
- Quarter Kelly $500.00
What Kelly assumes, and why it is usually wrong
It assumes your probability is right. The formula takes your number as fact. If your 60% is really 55%, full Kelly is not slightly too big — it is a stake sized for an edge you do not have, and the growth it promises turns into a drawdown.
It assumes you can repeat it. Kelly maximises growth over many independent bets. On a single position it says nothing useful about whether you will be glad you took it.
It ignores the spread. The price you pay is the ask, not the mid, and you will sell at the bid. On a thin market that gap can be larger than the edge the calculator just printed.
The swings are larger than people expect. A full-Kelly bankroll halving at some point is normal rather than a sign anything went wrong. This is why half and quarter Kelly are shown beside the full figure rather than as a footnote.
Questions
- What is the Kelly criterion?
- A formula for how much of a bankroll to stake when you think a price is wrong. It picks the fraction that maximises the long-run growth rate of the bankroll — bet more than it and growth falls, bet enough more and the bankroll trends to zero even while every individual bet has positive expected value.
- How do you calculate Kelly for a prediction market?
- For a contract that pays $1, the fraction is (your probability - the price) / (1 - the price). A market at 50¢ where you think the outcome is 60% likely gives (0.60 - 0.50) / 0.50, or 20% of the bankroll. The formula is the same one written (pb - q) / b elsewhere; this form makes it obvious the stake is zero exactly when you agree with the market.
- Why do people bet half Kelly?
- Because full Kelly assumes your probability is right. It rarely is. Staking half the fraction gives up about a quarter of the growth rate and roughly halves the size of the swings, which is a trade most people prefer once they have lived through a drawdown. Quarter Kelly is common among people sizing off estimates rather than models.
- What does a negative Kelly fraction mean?
- That the market is asking more than you think the outcome is worth, so there is no bet here for you. It does not mean bet the other side: that side has its own price, and you would need to check it the same way.
- Can I practise this without risking money?
- Yes. Papermarkets carries live Polymarket and Kalshi prices and gives every account simulated funds, so you can size positions this way and see how the record looks after a few dozen have settled.
Size a position that costs nothing to get wrong
The point of a paper account is that you can run this sizing on real prices for a season and look at the record afterwards. Pick something from the live markets, or start with how paper trading a prediction market works. If your price is in American odds, convert it with the implied probability calculator first.