Kelly Criterion
Calculator
Find the mathematically optimal stake for any prediction market trade. Enter the market price, your probability estimate, and your bankroll — get full, half, and quarter Kelly recommendations instantly.
How much should I bet?
The Kelly Criterion gives the fraction of your bankroll that maximises long-run growth. Half-Kelly is the practical default — it cuts variance roughly in half while sacrificing little edge.
The Kelly formula for prediction markets
f* = (p − c) / (1 − c)
For buying YES: f* is the Kelly fraction of your bankroll. p is your probability estimate (0–1). c is the market price (0–1). Example: you estimate 55% (p=0.55), market is 40¢ (c=0.40) → f* = (0.55−0.40)/(1−0.40) = 0.15/0.60 = 25%.
f* = (c − p) / c
For buying NO: you're betting against the event. c is the YES price, p is your YES probability estimate. Example: you estimate 30% (p=0.30), YES is at 45¢ (c=0.45) → f* = (0.45−0.30)/0.45 = 0.15/0.45 = 33.3%. Kelly recommends 33.3% of bankroll on NO.
Variance reduction with little cost
Full Kelly maximises expected log wealth — but it requires perfectly calibrated probability estimates. In practice, estimates are never perfect. Half-Kelly halves variance (and maximum drawdown) while reducing long-run growth by only ~25%. Most serious traders use ½ or ¼ Kelly. Never exceed full Kelly.
When Kelly breaks down
Kelly assumes infinite, fractionable bets and accurate probability estimates. In prediction markets: (1) liquidity constrains how much you can buy without moving the price; (2) your estimate is uncertain — the true edge is smaller than you think; (3) simultaneous open positions mean Kelly fractions should be calculated across the whole portfolio, not per trade in isolation.
Kelly fraction by edge and market price
Each cell shows the full Kelly fraction (fraction of bankroll) for buying YES. Green = large edge, yellow = moderate, grey = thin. Half-Kelly stake = divide by 2.