Kelly Criterion Calculator
Find the mathematically optimal position size for a prediction market contract. Enter your true probability estimate and the market price to calculate full, half, and quarter Kelly sizing.
What the Kelly Criterion does
Kelly sizes positions to maximise the long-run growth rate of your bankroll. It tells you the exact fraction to stake given your edge and the odds on offer.
Bet more than Kelly and you grow slower — eventually to ruin. Bet less and you leave compounding on the table. Kelly finds the peak.
The formula for prediction markets
On binary markets priced in dollars, the Kelly fraction simplifies cleanly:
f* = (b × p − q) ÷ b
where p = your true probability
q = 1 − p
b = net payout per dollar risked
At a market price of $0.42, you risk $0.42 to win $0.58. If you genuinely believe the true probability sits at 55%, Kelly sizes the bet at roughly 21% of bankroll.
Why most traders use half Kelly
Full Kelly assumes your probability estimate is perfectly calibrated. In practice, estimates carry error. Half Kelly absorbs that uncertainty: it cuts drawdowns significantly while sacrificing only a small fraction of long-run growth rate. Quarter Kelly suits high-uncertainty edges.
The inputs that matter most
The quality of your true probability estimate dominates everything else. A 5% edge held consistently compounds into large gains. A 5% error in your estimate held consistently compounds into ruin.
Use the implied probability calculator to verify what the market already prices in before entering your estimate here.
Put the math to work
Kalshi offers CFTC-regulated event contracts with no trading fees — the tightest execution environment for sizing these positions. Fund an account and start applying Kelly to real markets.