How much of the portfolio belongs in this trade?
Three frameworks side by side: fixed-fractional risk (the professional default), full Kelly (theoretically optimal), and half-Kelly (Kelly with humility). Pick one and stick to it.
Built and reviewed by Stephen Omukoko Okoth
Mathematical Economist · ex-Morgan Stanley FI · Equilar
Inputs
Account & trade
Inputs
Edge (for Kelly)
Verdict
Fixed-fractional says 50 shares.
$ 6.0K of exposure (12.0% of account).
This is the size where, if your stop fills cleanly, you lose exactly your risk budget. Stick to it for boring, repeatable risk control.
Result
Three frameworks
Fixed-fractional shares
50
Risk per share
$ 10
$ 500 budget
Half-Kelly size
52 shares
$ 6.3K
Full Kelly size
104 shares
$ 12.5K
Kelly fraction
25.0%
Optimal bet, in theory
Half-Kelly fraction
12.5%
With safety margin
Common questions
What is position sizing?
How much of your portfolio you commit to a single trade or holding. The right answer balances expected return, conviction, and the cost of being wrong.
What is the Kelly criterion?
A formula for optimal bet size given the probability of winning and the win/loss ratio: f = (bp − q) / b, where b is the win/loss ratio, p is win probability, q = 1 − p. It maximizes long-run growth — but assumes you know the odds. Most people use 'half-Kelly' to be safe.
What's a fixed-fractional approach?
Risk a fixed percentage of equity (e.g., 1%) per trade. Position size = (account × risk%) ÷ (entry − stop). Simple, robust, and what most professional traders actually use.
Should I use Kelly?
Only if you genuinely have an edge with quantifiable probabilities — and even then, half-Kelly. Most retail investors are better served by fixed-fractional risk and diversification.