Kelly Criterion Calculator for Crypto
What is the Kelly Criterion?
The Kelly criterion is a formula for determining the optimal position size that maximizes long-term capital growth. For crypto trading, it balances the desire to capitalize on a winning strategy against the risk of ruin from over-betting.
The full Kelly formula is: f* = (p * b - q) / b, where p is win rate, b is the win/loss ratio, and q = 1 - p.
In practice, traders use fractional Kelly (typically 1/4 or 1/2 Kelly) to reduce volatility and drawdowns. dMoERA's production router uses fractional Kelly with a confidence-weighted adjustment across 80+ bots.
How to Use This Calculator
- Enter your strategy's win rate (percentage of winning trades)
- Enter your average win in bps (basis points)
- Enter your average loss in bps (basis points, as a positive number)
- Optionally adjust leverage and friction (exchange fees)
- The calculator shows full Kelly, half Kelly, and quarter Kelly fractions
Why Friction Matters for Crypto
Crypto exchanges charge 6-7 bps per side (12-14 bps round trip). A strategy that looks profitable before friction can be a loser after. This calculator subtracts friction from each trade before computing Kelly, matching how dMoERA's risk gatekeeper evaluates every bot signal.
Kelly Criterion vs Fixed Fractional Position Sizing
Fixed fractional sizing (e.g., "risk 1% per trade") doesn't adapt to your edge. Kelly does — it sizes larger when your edge is stronger and smaller when it's weaker. But full Kelly is aggressive; most professional traders use 1/4 to 1/2 Kelly to survive losing streaks.
Frequently Asked Questions
- What is a good Kelly fraction for crypto trading?
- Most professional crypto traders use 1/4 to 1/2 Kelly. Full Kelly maximizes geometric growth but produces large drawdowns. Fractional Kelly sacrifices some growth for much better risk-adjusted returns.
- Does the Kelly criterion work for crypto?
- Yes, but only if your win rate and average win/loss are measured after fees. Crypto trading has higher friction than equities (6-7 bps per side on exchanges), so you must account for this before computing Kelly.
- What is fractional Kelly?
- Fractional Kelly means using a fraction of the full Kelly recommendation. For example, half Kelly uses 50% of the full Kelly fraction. This reduces drawdowns and volatility while keeping most of the growth benefit.
- How does dMoERA use Kelly sizing?
- dMoERA's router applies a confidence-weighted fractional Kelly across 80+ bots. Each bot's Kelly fraction is adjusted by its proven track record, rolling Sharpe, and current market regime. The router caps individual bot allocations to prevent any single strategy from dominating.
Try dMoERA Studio — build, backtest, and deploy strategies with production-grade validation →