STRATEGY · 2026

The Kelly Criterion: Optimal Position Sizing [2026]

2026.03.23 · 11 min read · NOONOO TRADING

1. What Is the Kelly Criterion?

The Kelly criterion is a mathematical formula for calculating how much capital to bet to maximize long-term returns.

2. The Kelly Formula

📊 Formula

f* = (p × b - q) / b

f* = optimal betting fraction
p = win rate
q = loss rate (1-p)
b = payoff ratio, average profit / average loss

Example: win rate 55%, payoff ratio 2:1
f* = (0.55 × 2 - 0.45) / 2 = 32.5%

3. Practical Application: Fractional Kelly

Full Kelly, or 100%, is too volatile, so 1/4 Kelly, or Quarter Kelly, is used in practice.

4. NOONOO TRADING Capital Management

NOONOO TRADING combines Quarter Kelly with EV-based dynamic sizing to calculate mathematically optimized position sizes.

🃏 Mathematical AI Trading

See AI trading optimized with the Kelly criterion.

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