Kelly criterion calculator
You think the real probability is higher than the price. How much should you actually put on it? Enter your estimate and the market price to size the position properly.
Recommended default is half Kelly or less. Full Kelly is only correct if your probability estimate is perfectly calibrated — and it produces drawdowns most people abandon before the maths pays off.
The formula, in one line
For a contract that pays $1 and costs c, with your estimated probability p:
f* = (p − c) / (1 − c)
The numerator is your edge. The denominator is what you win per contract. If your estimate equals the price, the fraction is zero — no edge, no position. If your estimate is below the price, the fraction goes negative, which means the trade is bad and the answer is not "bet the other side blindly" but "size zero."
Where Kelly quietly betrays you
- Correlated positions. Five contracts that all depend on one Fed decision are one bet, not five. Sizing each at Kelly means five times the intended exposure.
- Overconfidence. Kelly is exquisitely sensitive to your estimate. Being wrong by five points on probability changes the optimal size far more than it feels like it should.
- Fees. The formula above ignores them. On Kalshi, subtract the fee per contract from your edge before sizing.
- Liquidity. Kelly may tell you to buy 900 contracts in a book with 200 on offer. Depth is a hard cap the formula knows nothing about.
Where the estimate comes from
Kelly answers "how much," never "is my number right." That second question is the whole game — and it's why FluxrBot spends its effort on pricing news into probabilities rather than on execution tricks.
Common questions
What is the Kelly criterion?
A formula for position sizing that maximizes the long-run growth rate of a bankroll. For a binary contract it reduces to f = (p − price) / (1 − price), where p is your estimated probability and price is what the market charges.
Why do most traders use fractional Kelly?
Full Kelly assumes your probability estimate is exactly right. It rarely is. Half or quarter Kelly cuts volatility dramatically while keeping most of the growth, and it protects you when your estimate is off.
What does a negative Kelly fraction mean?
It means the trade is negative expected value at this price — your estimated probability is below what the market charges. The correct position size is zero.
Does Kelly work on prediction markets?
Yes, and cleaner than on sportsbooks, because contract prices are probabilities directly. The main caveat is correlation: several positions on related events aren't independent bets, and Kelly sized individually will over-allocate.