Should I bet full Kelly?

No, not when you estimated p and b from data. Full Kelly assumes you know the true win rate and win/loss ratio. With estimation error, full Kelly often turns into over-betting and ruinous drawdowns. Half-Kelly (0.5×) or quarter-Kelly (0.25×) is the standard real-world choice — Thorp and MacLean argue this in print.

What's the ruin rate output mean?

It's the fraction of simulated paths where bankroll fell below the threshold you set (typically 50% of starting capital). Ruin rate is sensitive to Kelly fraction, edge size, and number of trades. A non-zero ruin rate at quarter-Kelly is a sign your estimated edge is too thin or your trade count is too high.

What's a common mistake when using Fractional Kelly Sizer?

Plugging in your in-sample win rate as p — Kelly assumes the edge is real and stable. Use out-of-sample or walk-forward win rate, or shrink p toward 0.5.

How do correlated bets break the single-bet formula?

The single-bet formula assumes independence. If you size 5 correlated positions all at quarter-Kelly, your effective bet on the shared factor is closer to 5× quarter-Kelly than to one. Either reduce each position by sqrt(N) of the correlation count, or size off the factor rather than the leg.

general Calculator Guide

How to use Fractional Kelly Sizer

From win probability p, win/loss ratio b, and a Kelly fraction (full / half / quarter / eighth), it computes the bet size that maximizes long-run log-growth and runs a Monte Carlo simulation reporting median ending bankroll, drawdown distribution, and ruin rate.

5 STEPSPublished May 12, 2026Live Content

By Orbyd Editorial · AI Fin Hub Team

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Fractional Kelly Sizer

Map conviction tiers to fractional Kelly bet sizes with a drawdown Monte Carlo simulator. Client-side. Private by default.

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On This Page

Overview 5 steps Scenarios FAQ

What It Does

Use the calculator with intent

Traders and quants who already have a measured edge and need to size positions for log-growth without blowing up at the tail.

Interpreting Results

Compare the Kelly fraction's median bankroll against the ruin rate. Full-Kelly maximizes growth but tolerates 50%+ drawdowns. Quarter-Kelly trades roughly 40% of the geometric growth for a much shallower drawdown distribution.

Input Steps

Field by field

1

Enter inputs

Enter win probability p (decimal 0-1) and win/loss ratio b (avg win / avg loss). These are the only required inputs — no historical data upload needed.
2

Pick option

Pick a Kelly fraction (full / half / quarter / eighth). Quarter-Kelly is a sensible default for real-world strategies where p and b are estimated from data.
3

Set parameters

Set a single-trade absolute cap (e.g., 5% of bankroll max). This bounds the worst case even if the formula recommends more.
4

Run calculation

Run the Monte Carlo. Read median ending bankroll, 5th-percentile ending bankroll, max drawdown, and ruin rate together — high median with high ruin rate means the strategy gambles for growth.
5

Re-run

Re-run with a smaller Kelly fraction if ruin rate is non-zero. Re-run with longer horizon (more trades) to see how the distribution tightens.

Common Scenarios

Use realistic starting points

Edge well-measured, half-Kelly preferred

Win probability p

0.58

Win/loss ratio b

1.20

Kelly fraction

half

Bet ~10% of bankroll, median bankroll grows steadily, ruin rate near zero over 1k trades.

Uncertain edge, quarter-Kelly with cap

Win probability p

0.54

Win/loss ratio b

1.50

Kelly fraction

quarter

Cap

Cap binds before Kelly recommendation; check the path-percentile chart for max drawdown across simulations.

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FAQ

Questions people ask next

The short answers readers usually want after the first pass.

Kelly's 1956 derivation maximizes the long-run expected log-growth of bankroll. Fixed dollars don't compound efficiently because winning bets aren't pressed and losing streaks don't shrink the bet size. Fractional sizing keeps geometric growth optimal; the cost is that drawdowns can be severe at full Kelly.