Your Kelly fraction will be calculated based on your current backtest and live results. If the characteristic of your future live results is going to differ significantly, then your current Kelly fraction may be over or understated.
If you bothered to look at the Kelly equation, you'd realize that it is not static. Ergo, the Kelly solution is not fixed, it is adaptive. In a drawdown (aka a series of loses), the Kelly fraction will shrink, thus reducing exposure (aka risk). In a series of wins, the Kelly fraction will grow, thus increasing profits. It's as easy to use adaptive Kelly in a backtest as in live trading. It's all good.
Those who are looking for comfort can always use fractional Kelly instead of full Kelly. But both require knowing what the real Kelly fraction is. Just guessing what position size to use is so suboptimal, it is actually detrimental.
For the vast majority of traders optimal is not only irrelevant but dangerous. They know when they are exceeding their comfort level and should pull back to what has been refeered to as the "sleeping point". As I've said for those experienced, accomplished traders optimizing is important. For all others it, as a general rule, obscures what is truly important -- COMFORT! The title of this thread is: "The Kelly criterion - is it good...or bad?" I have tried to point out that while it is a good tool -- maybe even an essential tool -- for some it is not a tool that most here on ET should be using. BTW ... I don't recommend using fractional comfort. Take a bit less but trade in your comfort zone in the early years.
You apparently misunderstand fractional Kelly, which is not "fractional comfort". Perhaps you should read up on fractional Kelly before cavalierly dismissing it as inappropriate. It's very popular among certain traders for good reason. All I'm saying is picking an arbitrary "comfort size" like 2% sounds OK in theory, but if you know you can risk a little more via fractional Kelly and still be reasonably safe, or if you know you should be risking less than the arbitrary amount because your strategy is dying off and your fractional Kelly value confirms this, then that's a kind of comfort that arbitrary guesswork can't buy.
Kelly has a major problem in that it assumes your amount can go infinitely small. This is not true, because once the dollar amount goes below a certain amount in your account it's the same as being broke.
That's not a problem with Kelly, that's a problem with your sucky strategy that drains your account down to nothing. :eek: