Kelly Risk management | High-logical-Best Possible-risk to take so that we can quickly appreciate or depreciate the account balance
The Kelly Formula also called the Kelly Criterion, is a very different
risk management method. It is designed to maximize profit but takes much
larger risks than the fixed fractional method.
Kelly grows profits geometrically rather than arithmetically.
***A geometric curve also means that the returns on a portfolio of trades are not even. That means that the returns on wins are bigger than losses.
Here is the formula for determining how much to bet:
F = (bp − q)/b
Where F is the percentage of the current bankroll to wager,
b is the average winner(in base currency) divided by the average loser(in base currency),
p is the probability of winning, which is the number of winners divided by the total number of trades,
q is the probability of losing, which is simply 1 – p.
So let’s say that we make 100 pips on average when we win and lose 50 pips when we lose. The ratio is 2:1 so we would put in 2 for the b in the formula. P is the percent of total trades that are winners and q is simply 1 minus p
I can't understand what advantage will you have with automatic risk calculation. Do you want to calc risk on last X trades, so it will change over time? Why is it better than calculating on the previous year history of trades and using this risk all next year?
Let's not complicate things, just it is simply F=(bp-q)/b; We can add these b-p-q values manually.
Note:- if F is negative it means not to buy or sell with the technique/strategy.