Trade Expectancy & Kelly Calculator
Find out whether your trading approach has an edge and how much of your capital to risk per trade. Enter your win rate and your average win and loss. Runs in your browser; nothing is uploaded.
A worked example
Say your last 100 trades won 40% of the time, with an average win of Rs 300 and an average loss of Rs 100. Expectancy per trade is 0.4 times 300 minus 0.6 times 100, which comes to Rs 60, so over 100 trades this approach should add up to about Rs 6,000 before charges. The profit factor, total wins over total losses, works out to 2, and the breakeven win rate given that payoff ratio is 25%, well below your actual 40%, which is what makes the edge real rather than a run of luck. The Kelly formula says the mathematically aggressive bet size here is 20% of capital per trade, which is exactly why the calculator also shows half and quarter Kelly as the sizes most traders would actually use.
Understanding the calculation
- Expectancy
- Win rate times average win, minus loss rate times average loss. Shown in rupees and in R, where 1R is your average loss.
- Profit factor
- Expected winnings divided by expected losses per trade. Above 1 means profitable.
- Kelly fraction
- Win rate minus (loss rate divided by the payoff ratio). It is the share of capital to put at risk on each trade, where the risk is what you lose if the stop-loss is hit. If it is zero or negative, the formula says the approach has no edge.
- Losing streak
- An estimate of the longest losing run in that many trades, from the standard result for the longest run in repeated independent trials. It is an average across many possible sequences, not a limit.
Common questions
What is trade expectancy?
Expectancy is the average amount you can expect to make or lose per trade over many trades. It is your win rate times your average win, minus your loss rate times your average loss. A positive number means the approach has an edge before costs; a negative number means it loses money over time, however good individual trades look.
What is a profit factor?
Profit factor is total winnings divided by total losses. Above 1 you are profitable, at 1 you break even, and below 1 you lose. It is calculated here from your win rate and average win and loss, so it is the profit factor you would expect over many trades, not one measured from a small sample.
What is the Kelly criterion?
Kelly is a formula for the fraction of your capital to risk on each trade to grow it fastest over the long run. It is the win rate minus the loss rate divided by the payoff ratio. It assumes your win rate and average win and loss are accurate, which is rarely true, so most traders use half or quarter of the Kelly figure.
Why is full Kelly considered aggressive?
Full Kelly maximises long-run growth but produces large swings, and it is very sensitive to estimation error: if your true win rate is a little lower than you think, full Kelly can overbet badly. Half Kelly gives up some growth in exchange for much smaller drawdowns.
What does the losing streak figure mean?
It is roughly the longest run of consecutive losses you should expect somewhere in that many trades, given your win rate. It is an average, so a longer streak is entirely possible. Knowing it in advance helps you size positions so a normal bad run does not force you out.
How many trades do I need before trusting these numbers?
Many more than most people expect. With fewer than about 100 trades, your measured win rate and average win and loss can be far from their true values, so treat the output as a rough guide and update it as your trade record grows.