Enter the winning probability and the win/loss ratio into the calculator to determine the optimal Kelly percentage for betting or investment. This calculator helps you to apply the Kelly Criterion to maximize the growth of your capital over the long term.
Kelly Formula
The following formula is used to calculate the Kelly percentage.
K = (WP - (1 - WP) / WLR) * 100
Variables:
- K% is the Kelly percentage (%)
- WP is the winning probability (expressed as a decimal from 0 to 1)
- WLR is the win/loss ratio
To calculate the Kelly percentage, subtract the probability of losing from the winning probability, divide by the win/loss ratio, and then multiply by 100 to get the percentage.
What is the Kelly Criterion?
The Kelly Criterion is a formula used to determine the optimal size of a series of bets. In gambling and investing, the Kelly Criterion calculates the percentage of capital to be used in each bet or investment to maximize the logarithm of wealth. The goal is to maximize the expected value of the logarithm of wealth, which is equivalent to maximizing the expected geometric growth rate.
How to Calculate Kelly Percentage?
The following steps outline how to calculate the Kelly Percentage.
- First, determine the winning probability (WP) of the bet or investment.
- Next, determine the win/loss ratio (WLR).
- Next, gather the formula from above = K% = (WP – (1 – WP) / WLR) * 100.
- Finally, calculate the Kelly Percentage (K%).
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
Winning probability (WP) = 0.55
Win/Loss Ratio (WLR) = 2
