KELLY CRITERION

HOW MUCH SHOULD YOU RISK ON EACH TRADE? – LOOK AT THE KELLY CRITERION

This is a question that doesn’t have a definitive answer. However, one of the most reputable answers comes from the Kelly Criterion. It basically says, that you should risk an amount based on the winning probability that you have. If you have a profitable trading system, that tells you that you have a high probability of winning you should risk more on that trade. Otherwise you should risk less. The amount to risk also depends on the symmetry of your bets. If you have a positive asymmetry, which means that you could win more that what you risk, then you should also bet more.

Please take a look at our video where we explain in more detail this concept. Also, if you want to learn about algorithmic trading, don’t hesitate to register on our course or please visit our trading tools section.

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