Kelly criterion: stake size and risk

For decimal odds O and probability p, the bankroll fraction is f = (p × O − 1) / (O − 1). With p = 55% and O = 2.00, full Kelly suggests 10% of bankroll.

If the numerator is zero or negative, there is no mathematical edge and the fraction should be zero. A negative answer is not an instruction to back the opposite outcome.

The classical formula assumes that probability is known and opportunities repeat. In reality estimates contain error, positions are correlated and the available price can move. Overstated probability quickly inflates the suggested stake.

Half or quarter Kelly is therefore common in practice. It reduces volatility and the cost of estimation error, but it does not remove the risk of loss.

At odds of 2.00, a 55% estimate gives 10% full Kelly. If a more cautious estimate is 52%, the suggestion falls to 4%. Only three percentage points changed the position by more than half.

This is why probability calibration matters alongside average accuracy. A stake-sizing formula cannot repair a weak forecasting model.

Set a maximum bankroll fraction in advance, account for correlated positions and never use money required for essential expenses. Update bankroll after settlement, not after an emotional reaction to a streak.

Any calculator is a scenario based on its inputs. It cannot know the next outcome, the quality of the probability source or your tolerance for drawdown.