HOW TO · PAPER PRACTICE

How to use Kelly Criterion Calculator

Study how sensitive a theoretical allocation formula is to an uncertain probability estimate.

Before you start

Treat Bankroll ($) as a fictional point budget. Kelly relies on strong assumptions and is not a personal allocation recommendation.

Open Kelly Criterion Calculator

Step by step

  1. Enter 1,000 fictional points in Bankroll ($).
  2. Enter 60 in Your Estimated Probability (%) and 0.50 in Market YES Price (0-1).
  3. Select Calculate Kelly Bet. Compare full and fractional Kelly outputs.
  4. Repeat at probabilities of 55 and 50. Note how sharply the model allocation changes.

Worked example

For p = 0.60 and price = 0.50, full Kelly is (0.60 − 0.50) ÷ (1 − 0.50) = 20%, or 200 of 1,000 fictional points. Half Kelly is 100 points. At p = 0.50 the theoretical allocation is zero.

What the result means

The formula assumes the probability is useful and the payoff structure is correct. Correlated outcomes, estimation error, costs, and loss tolerance can invalidate its practical use. Smaller fractions still do not make an incorrect estimate reliable.

If something goes wrong

Use 0.50 for price here, not 50. If old inputs reappear, use Clear saved data and enter the practice values again.

Check your understanding

Lower the estimate by five percentage points. Describe the change without treating any output as an instruction to commit money.