Kelly Criterion on Deriv
Kelly sizes each stake from your estimated chance of winning and the payout. If it finds no edge, the stake is zero.
How Kelly Criterion works
The Kelly fraction is (b × p − (1 − p)) ÷ b, where p is your estimated probability of winning and b is the net payout per unit staked. The stake is that fraction of your bankroll.
It needs your win probability as an input, and without it no stake can be calculated. If your estimate shows no edge, the stake is zero, meaning the strategy tells the bot not to trade.
The rules
- Estimate your win probability, p.
- Find the net payout per unit staked, b.
- Fraction = (b × p − (1 − p)) ÷ b.
- Stake = fraction × bankroll; zero if the fraction is not positive.
A worked example
| Estimated win probability | Share of bankroll | Stake (USD) |
|---|---|---|
| 50% | 0% | 0.00 |
| 55% | 0% | 0.00 |
| 60% | 10% | 100.00 |
| 65% | 21.25% | 212.50 |
Full Kelly on a 1,000 USD bankroll with an illustrative 80% payout. Kelly fraction = (b × p − (1 − p)) ÷ b, where p is your estimated win probability and b is the net payout per unit staked (0.8 here). A result of 0% means no edge, so no stake.
Risks to understand
Only as good as your estimate
Kelly assumes p is right. If you overestimate your chance of winning, it stakes too much.
Full Kelly is volatile
Even with a correct estimate, full Kelly stakes can swing your bankroll widely. Many traders use a fraction of it.
No staking plan creates an edge
Kelly decides how much to stake given an edge you provide. It cannot find one.
Using Kelly Criterion in AI Binary Bots
Choose it from the Progression Strategies dropdown in the Trading Panel, then turn on risk management to add a stop loss and take profit. Practice on a Deriv demo account first and review drawdown and largest loss in Trade analytics. No staking plan creates an edge: progressions only reshape how much you stake, not whether a trade wins.
Test Kelly Criterion on a Deriv demo account before you risk real money.
Get StartedFrequently asked questions
- What does Kelly need from me?
- Your estimated probability of winning. Without it, no stake is calculated.
- Why would the stake be zero?
- If your estimated probability and the payout show no edge, the Kelly fraction is not positive, so the strategy advises no trade.
Keep reading
- Fractional KellyFractional Kelly takes the Kelly stake and scales it down, for example to half, to make your balance swing less.
- Percentage of bankrollPercentage staking risks the same share of your balance on every trade, so stakes shrink as you lose and grow as you win.
- All strategy guidesCompare every staking strategy in one place.
Risk warning: Trading binary options involves a high level of risk and you could lose your entire stake. Only trade with money you can afford to lose. This page is educational and is not financial advice.