What Kelly is (and why NOT to use it in full)
The Kelly criterion computes the fraction of your capital that maximises long-term growth, given your win rate and ratio. The formula: f = W − (1 − W) / R, where W is your win rate and R your reward/risk ratio. If the result is zero or negative, you have no edge and shouldn't risk anything.
⚠️ Full Kelly is too aggressive for real trading. Kelly assumes you know your win rate and ratio with perfect precision — and in trading you don't: you estimate them from a small sample and they shift with the market. If you overestimate your edge (you almost always do), full Kelly leads to brutal drawdowns and ruin. That's why professionals use fractional Kelly: half Kelly, or better a quarter Kelly. You give up a little theoretical growth for far less volatility and risk of ruin.
Our practical recommendation: use the calculator as a ceiling, not a target. If Kelly says 20%, don't dream of risking that per trade; a quarter (5%) is already aggressive. For most people, the old 1% rule is wiser than any Kelly, because it protects against the worst enemy: your own overestimation of the edge. See what high risk actually does in the risk of ruin calculator.