How it works
The Kelly criterion gives the fraction of capital per trade that maximizes long-run (geometric) growth, assuming your inputs are correct. With win rate W and payoff ratio b = average win ÷ average loss, Kelly f* = W − (1 − W) ÷ b. Expected value per trade in R = W × average win − (1 − W) × average loss.
Worked example with the default values: W = 55% and b = 1.5 give f* = 0.55 − 0.45 ÷ 1.5 = 25%, half Kelly 12.5% and quarter Kelly 6.25%. The expected value is about 0.38 R per trade. The chart runs one simulated sequence of trades, identical for every line, on a log scale. In theory, half Kelly keeps roughly three quarters of the growth rate with about half the volatility; at around 2× Kelly the expected growth falls to zero or below.
Limits: win rate and payoffs are estimates, and Kelly reacts strongly when they are too optimistic. Trades are assumed independent with fixed outcomes, losses never exceed the average loss, and costs are ignored. If the expected value is zero or negative, Kelly is 0%: no bet size makes the setup profitable. The result is a theoretical reference, not a recommendation for how much to risk. To turn a percentage into units, use the position size calculator; to see the spread of outcomes, try the Monte Carlo simulator.