Sheet 12 - Tools · TL-014DWG SP-2026-26

Kelly & Risk of Ruin.

How much of your bankroll should one trade risk? Kelly sizes the bet for maximum long-run growth; risk of ruin prices your survival at the size you actually use.

Your edge

Win rate %

From your journal — not your hopes.

Average win (R)

2 = wins pay twice the risk.

Average loss (R)

Usually 1R — your stop.

Risk per trade %

The size you use — for the ruin math.

OutputTL-014/A

Full Kelly–

Half Kelly — the sane one–

Quarter Kelly–

Expectancy / trade–

Risk of ruin–

Losing streak to −50%–

Verdict

–

Method

Kelly fractionf* = p − q / b — p win rate, q = 1 − p, b = avg win ÷ avg loss

Expectancyp × avg win − q × avg loss (in R)

Risk of ruin((1 − e) / (1 + e))^N — e = edge per unit risked, N = bankroll ÷ risk per trade. Standard approximation.

Streak to −50%ln(0.5) ÷ ln(1 − risk per trade) consecutive full losses

Kelly assumes your edge is known and stable — it never is. Overbetting a misestimated edge is the classic ruin path, which is why professionals use half or quarter Kelly. If expectancy is zero or negative, no position size saves the system: fix the edge first (TL-007).

Size it right, then prove it trade by trade.

Sidepick Ledger logs every position against your risk rules — one ledger for the whole journey.

View Ledger · $19