# Kelly Criterion Calculator > Free Kelly criterion calculator. Enter your win probability and payoff ratio to find the full Kelly fraction, a safer fractional Kelly and expected growth. Source: https://learn.tradelabsai.com/tools/kelly-criterion-calculator/ Track: Calculators · Level: Beginner · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Kelly Criterion Calculator", https://learn.tradelabsai.com/tools/kelly-criterion-calculator/ The Kelly criterion, developed by John Kelly at Bell Labs in 1956, calculates the fraction of your bankroll to risk on a bet or trade to maximise long run growth, given your edge. Bet less than Kelly and you grow more slowly; bet more and you grow more slowly too, with far larger drawdowns, and well above Kelly your bankroll can shrink even with a positive edge. Because real edges are uncertain, most practitioners use a fraction of Kelly. This calculator shows full Kelly, your chosen fraction and the expected growth per bet. ## Calculator *Interactive calculator: use it at https://learn.tradelabsai.com/tools/kelly-criterion-calculator/* ## How it works ``` Kelly fraction f* = p - (1 - p) / b Expected log growth per bet = p × ln(1 + b × f) + (1 - p) × ln(1 - f) ``` Here p is the probability of winning, b is how much you win per unit risked, and f is the fraction of bankroll risked. A negative Kelly fraction means there is no edge, and the right bet is zero. See [Kelly Criterion](https://learn.tradelabsai.com/risk/kelly-criterion/). **Example: An even money edge** A bet pays 1 to 1 and you win 55% of the time. Kelly is 0.55 minus 0.45 divided by 1, which is 0.10, so full Kelly risks 10% of the bankroll per bet. Half Kelly risks 5%. The expected log growth at 5% is about 0.375% per bet, roughly three quarters of the growth at full Kelly, with much smaller swings. If your true win rate were 52% rather than 55%, full Kelly at 10% would be heavily oversized, since the correct Kelly would only be 4%. See [Fractional Kelly](https://learn.tradelabsai.com/risk/fractional-kelly/). ## Kelly for prediction markets On a prediction market contract priced at $0.40 that pays $1 if correct, the payoff ratio is 0.60 divided by 0.40, or 1.5. If you believe the true probability is 50%, Kelly is 0.50 minus 0.50 divided by 1.5, about 16.7% of bankroll. If your estimate is wrong and the market's 40% is right, Kelly is zero. Small errors in probability estimates make large differences in Kelly sizing. See [Reading Odds as Probabilities](https://learn.tradelabsai.com/prediction-markets/reading-odds-as-probabilities/) and [Prediction Market Strategies and Risks](https://learn.tradelabsai.com/prediction-markets/prediction-market-strategies/). ## Why fractional Kelly | Fraction | Growth (relative to full Kelly) | Volatility | |---|---|---| | 25% Kelly | About 44% | Much lower | | 50% Kelly | About 75% | About half | | 100% Kelly | 100% | High; deep drawdowns are common | | 200% Kelly | About 0% | Extreme | These growth figures follow from the standard approximation for small edges. Half Kelly sacrifices about a quarter of the growth for about half the volatility, a trade most traders gladly make, especially since estimates of edge are uncertain. ## Kelly for trading Trading outcomes are not simple win or lose bets with fixed payoffs, but the idea still applies. Estimate win rate and payoff ratio from a large sample of trades, apply a conservative fraction and treat the result as a ceiling on risk per trade, not a target. Many traders find that their Kelly fraction, even halved, is well above the 1% to 2% risk per trade they actually use. See [Position Sizing](https://learn.tradelabsai.com/risk/position-sizing/) and [Fixed Percentage vs Fixed Dollar Risk](https://learn.tradelabsai.com/risk/fixed-percentage-risk/). ## Common mistakes 1. **Overestimating your edge,** which leads to oversized bets. 2. **Using full Kelly** with uncertain estimates. 3. **Ignoring correlated bets** taken at the same time. 4. **Applying Kelly to small samples.** See [Statistical Significance in Trading](https://learn.tradelabsai.com/math/statistical-significance/). 5. **Forgetting costs,** which reduce the edge. See [Expected Value](https://learn.tradelabsai.com/math/expected-value/). ## Frequently asked questions ### What is the Kelly criterion? A formula that gives the fraction of your bankroll to risk on each bet or trade to maximise long term growth, based on win probability and payoff. ### Why do traders use half Kelly? It keeps most of the growth while roughly halving volatility and protecting against overestimated edges. ### What if the Kelly fraction is negative? It means the bet has no edge at the assumed odds, so the growth maximising bet size is zero. Next, measure how assets move together with the [Correlation and Beta Calculator](https://learn.tradelabsai.com/tools/correlation-and-beta-calculator/). ## Continue learning - Next lesson: [Correlation and Beta Calculator](https://learn.tradelabsai.com/tools/correlation-and-beta-calculator/) - Previous lesson: [Sharpe and Sortino Calculator](https://learn.tradelabsai.com/tools/sharpe-and-sortino-calculator/) - Related: [Sharpe and Sortino Calculator](https://learn.tradelabsai.com/tools/sharpe-and-sortino-calculator/): Free Sharpe and Sortino ratio calculator. Paste your monthly, weekly or daily returns and get annualised return, volatility, Sharpe and Sortino ratios. - Related: [Kelly Criterion](https://learn.tradelabsai.com/risk/kelly-criterion/): The Kelly criterion finds the bet size that maximises long term growth given your edge. Learn the formula, worked examples and why most traders use less. - Related: [Fractional Kelly](https://learn.tradelabsai.com/risk/fractional-kelly/): Fractional Kelly bets a portion of the full Kelly fraction to cut drawdowns and protect against overestimated edges. Learn how much to use and why. - Related: [Position Sizing](https://learn.tradelabsai.com/risk/position-sizing/): Position sizing decides how many shares or contracts to trade so each loss stays small. Learn the formula, worked examples for each market and common mistakes. - Related: [Expected Value](https://learn.tradelabsai.com/math/expected-value/): Expected value is the average result of a bet over many repetitions. Learn the formula, trading and prediction market examples, and why EV alone is not enough. - Related: [Reading Odds as Probabilities](https://learn.tradelabsai.com/prediction-markets/reading-odds-as-probabilities/): Learn to turn prediction market prices into probabilities, adjust for spreads and long shot bias, compare with your own estimate and find value with expected value.