Calculate optimal position sizing for maximum growth
The Kelly Criterion calculates the optimal fraction of your capital to risk on each trade to maximize long-term growth. The formula is: Kelly% = (W × R - (1-W)) / R, where W is win rate and R is win/loss ratio.
Full Kelly is mathematically optimal but extremely aggressive — most practitioners use Half Kelly for smoother equity curves. Half Kelly captures 75% of the growth with much less volatility.
A positive edge (expected value per trade) is required. If your Kelly percentage is negative, the strategy has negative expected value and should not be traded.
