What is a Kelly Criterion?
The Kelly criterion is a money management strategy for trading that was developed by J.L. Kelly, Jr. in 1956.
The Kelly criterion is a money management strategy for trading that was developed by J.L. Kelly, Jr. in 1956. It is a formula that determines the optimal size of each bet in order to maximize the long-term growth of the account.
The Kelly criterion balances the potential return of a trade with the risk of ruin. It does this by considering the expected value of the trade and the probability of losing money. The Kelly formula is:
Position size = (W% – L%) / (W% – L%)
Where W% is the percentage of winning trades and L% is the percentage of losing trades.
The Kelly criterion has been used by traders for many years and has been shown to be a successful strategy for long-term growth. However, it is important to remember that it is a risk management tool and should not be used as a trading system.
Category: Sports.
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