Kelly Calculator

The Kelly Calculator answers the single hardest question in trading: **how much should I actually bet?** You can have a perfect read on a market, but if you size positions by gut feel you will either leave money on the table or blow up your bankroll on a bad streak. The Kelly Criterion turns your edge into a mathematically optimal stake — and Predite wraps it in a calculator that runs live as you type, with conservative defaults and a hard fail-safe built in.

Find it at **/dashboard/kelly** (labeled "Position Size Calculator" in the sidebar, also reachable via search with Cmd/Ctrl+K).

## What It Does

The calculator takes your view of a market, the price the market is offering, and your available capital, then tells you the dollar size that maximizes long-run bankroll growth. It is a standalone tool — nothing is stored, nothing is sent to an exchange, and every keystroke recomputes instantly. Use it to sanity-check a position before you place it manually, or to size trades you found in the **EV Scanner**.

Alongside the recommended size, it surfaces the numbers that actually matter for a decision:

## The Four Inputs

1. **Bankroll ($)** — the total capital you are willing to allocate to this market or category, *not* your entire net worth. If you have $50,000 in your account but only ever risk $10,000 on politics markets, enter $10,000. Kelly sizes relative to this number, so getting it right is the most important input. 2. **Your Probability (%)** — your honest estimate of the true chance the YES outcome happens. This is the subjective heart of the calculation. Pull it from your own research, historical base rates, a model, or Predite's **AI Probability** estimate. If you genuinely have no view, Kelly has nothing to work with. 3. **Market Price (¢)** — the current price of the YES contract, which on Polymarket and Kalshi is just the market's implied probability. A contract trading at 50¢ means the market thinks it's a coin flip. Your edge is the gap between your number and this one. 4. **Kelly Fraction** — a slider from aggressive (Full Kelly) down to conservative. It defaults to **¼ (25%)**, the recommended setting for almost everyone. More on why below.

## The Formula

The textbook Kelly formula is:

f\* = (bp − q) / b

where:

For a binary prediction-market contract this collapses to a much cleaner form:

f\* = (your probability − market price) / (1 − market price)

That fraction is the percentage of your bankroll Full Kelly says to wager.

### Worked Example

You think a market is **60%** likely to resolve YES, but it's trading at **50¢**, and your bankroll is **$10,000**.

The payout ratio at 50¢ is 1:1, so if you win you make $500 and if you lose you're down $500 — but because your probability beats the price, the **EV per trade is positive** ($40 on the Full Kelly stake in this example). The calculator shows all of this without you doing any arithmetic.

A second example shows why price matters as much as edge. If your probability is 50% but the contract trades at just **20¢**, Full Kelly is (0.50 − 0.20) / 0.80 = **0.375** — a much larger position, because the 4:1 payout rewards you heavily when you're right. Cheap contracts with real edge get sized up; expensive ones get sized down.

## Why Fractional Kelly (¼) Is the Default

Full Kelly is *growth-optimal in theory*, but the theory assumes you know the true probability exactly. In the real world your probability estimate is, at best, a good guess — and Full Kelly is brutally unforgiving of overconfidence. It routinely produces **drawdowns over 50%**, and a single overestimate of your edge can push you toward ruin.

Fractional Kelly fixes this. By staking a *fraction* of the Full Kelly amount, you trade a little expected growth for a large reduction in volatility:

The slider lets you move toward Half Kelly if you have strong, well-calibrated estimates and a higher risk tolerance, but we recommend most traders never go above Half. The what-if table makes the trade-off concrete: you can see the dollar size and growth rate at each fraction in one glance, with your current setting highlighted.

## The 25% Bankroll Cap (Fail-Safe)

On top of fractional Kelly, the calculator enforces a hard ceiling: **no recommendation will ever exceed 25% of your bankroll**, regardless of what the math says.

Why? Because when your estimated edge is huge — say you mark something at 90% that's trading at 30¢ — raw Full Kelly would tell you to bet over 85% of your bankroll. That is exactly the situation where you are most likely to be *wrong*, because edges that large usually mean you've made an error, the market knows something you don't, or you're fooling yourself. Sizing 85% into a single market is how accounts get wiped out.

When the cap kicks in, you'll see an amber **"capped"** warning and a note explaining that the raw Kelly number was clamped to 25% as a defensive measure. Treat that warning as a prompt to double-check your probability — if Kelly wants to bet the farm, your inputs deserve a second look.

## The No-Edge Guard

If your probability is **equal to or below** the market price, there is no edge, and the calculator refuses to recommend a bet. Instead of a size, you'll get a clear **"No edge — don't bet"** message.

This is the discipline Kelly enforces and the lesson most traders learn too late: **betting without an informational advantage is negative-EV**. If you think a market is 45% and it's priced at 50¢, the market is offering you a fair-or-worse price. Walk away. The tool will not let you talk yourself into it.

## Step-by-Step: Sizing a Trade

1. Open **/dashboard/kelly**. 2. Enter your **bankroll** for this market or category — the real number you'd risk here, not your account total. 3. Type **your probability** as a percentage. Be honest and, ideally, calibrated. 4. Enter the **current YES price** in cents, straight from Polymarket or Kalshi. 5. Read the **recommended size** — it updates live. The default ¼ Kelly is already applied. 6. Check the **edge, EV, and growth** stats to confirm the trade is worth taking. 7. If you see the **capped** warning, revisit your probability before proceeding. 8. Glance at the **what-if table** to understand how much more (or less) risk other fractions imply. 9. Place the trade manually on the platform — or, on the **Bot plan**, route it through live trading or a bot.

## Tips and Gotchas

## Limitations

## Plan Requirements

The Kelly Calculator is included on the **Pro ($59/mo)** and **Bot ($99/mo)** plans. Starter ($29/mo) does not include it — upgrade to Pro to unlock the calculator along with the whale tracker, arbitrage scanner, backtesting engine, and AI tools. **Live order execution** (placing the sized trade automatically via Polymarket CLOB) is a separate **Bot plan** feature; on Pro you size with Kelly and place the order yourself.

## How It Connects to Other Features

Kelly sits in the middle of a complete workflow. Find an opportunity in the **EV Scanner**, pull a probability from **AI Probability**, size it here, pressure-test the fill with the Slippage Simulator, place it (manually on Pro, automated on Bot), and log the result in your **Trade Journal** so your future probability estimates get sharper. Bot-plan traders can wire Kelly-style sizing directly into automated strategies.

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