There is Good Kelly and there is Bad Kelly. This is Bad Kelly : K = p - (1-p)/(W/L) , where K is the Kelly ratio, p is the winrate, W is the average winning trade, L is the absolute value of the average losing trade. It is the result of some dunce shoehorning trading into the simplest form of Kelly, that derived from the basic casino bet. It is based on the incredible assumption that your average losing trade is identically equal to your trade size. That. Never. Happens. Not in the real world of trading, it doesn't. This "win/loss form of Kelly" is the one responsible for Kelly's undeserved reputation of blowing up trading accounts. Good Kelly never blows up trading accounts. One form of Kelly that is much better is K = p/S - (1-p)/R , where K is the Kelly ratio, p is the winrate, R is the average winning trade return, S is the absolute value of the average losing trade return. * * * Let's look at an example : There is a 70% chance that you lose your bet. There is a 10% chance that you lose five times your bet. There is a 20% chance that you win ten times your bet. As demonstrated in my previous Kelly thread (qv), the exact Kelly fraction is .0451 Using Bad Kelly, we calculate K = .2 - .8/(10/1.5) = .0800 Using LessBad Kelly, we calculate K = .2/1.5 - .8/10 = .0533 Clearly both results are overbetting (always a bad thing) due to simplifying a 3-outcome situation down to a 2-outcome situation, but Bad Kelly is the worst by a lot. Always use Good Kelly (see my previous Kelly thread) and avoid Bad Kelly.