Kelly Criterion Calculator

Overview

The Kelly Criterion Calculator determines the optimal percentage of your bankroll to wager on a given prediction market. It balances potential returns against the risk of ruin, providing a disciplined approach to capital allocation.

What It Does

This pillar applies the Kelly Criterion formula to calculate the ideal bet size. It takes your personal probability estimate for an outcome and compares it to the implied probability from the market odds. The output is a specific percentage of your capital to risk, ensuring you never over-bet your edge.

Why It Matters

Proper bet sizing is as crucial as accurate prediction for long-term profitability. This pillar provides a mathematical framework to avoid emotional betting decisions and systematically grow your capital by sizing bets according to your perceived edge.

How It Works

First, you input your personal estimated probability of an event occurring. Next, you enter the current market odds for that outcome. The pillar then calculates the 'Kelly fraction' using the formula. This fraction represents the optimal percentage of your bankroll to invest in that specific market.

Methodology

The core calculation uses the formula: f* = (bp - q) / b, where f* is the fraction of the bankroll to wager, b is the net odds received on the wager, p is the probability of winning, and q is the probability of losing (1 - p). The pillar requires the user to input their subjective probability (p) and the market price, from which net odds (b) are derived.

Edge & Advantage

It provides a disciplined, mathematical edge in capital management, preventing catastrophic losses from over-betting and maximizing compounding growth over time.

Key Indicators

• Win Probability Estimate

  high

  The user's subjective assessment of an outcome's likelihood, based on their own research and analysis.

• Market Odds

  high

  The current price or odds offered by the prediction market, which implies the market's collective probability.

• Kelly Fraction Output

  high

  The calculated optimal percentage of bankroll to wager, representing the mathematically ideal bet size.

Data Sources

• User's Own Analysis

  Provides the subjective win probability estimate, the most critical input for the formula.

• Prediction Market Platform

  Provides the current market odds for the wager.

Example Questions This Pillar Answers

• → If I believe there's a 60% chance of a bill passing and the market price is 50c, what percentage of my bankroll should I bet?
• → How much should I wager on a candidate to win if I think their true odds are higher than the market implies?
• → What is the optimal bet size for a longshot crypto price target given my risk tolerance and probability estimate?

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