TradingCalcDoes This Bet Have Edge?
KELLY CRITERION CALCULATOR · PREDICTION MARKETS · FRACTIONAL KELLY SIZING
Compare your probability estimate against a prediction market's price and size the bet with quarter-Kelly.
You think this is 60% likely · the market prices it at 40%· bankroll $10,000
Get this from a live market on Odds Converter or Market-Implied Odds.
Uses quarter-Kelly by default: a conservative haircut on the full Kelly criterion, since full Kelly is famously volatile bet-to-bet. This is bet sizing, not a probability estimate. It can't tell you if your own probability is actually right.
How much do you disagree with the market?
Enter your own probability estimate and the market's price. I'll tell you if the edge is worth betting on.
Does this bet have real edge?
A prediction market's price is the market's collective probability estimate. If your own estimate is meaningfully different, that gap, the edge, is what you're actually betting exists. This sizes how much of your bankroll that edge justifies staking, using the Kelly criterion: the formula that maximizes long-run bankroll growth for a repeated bet with a known edge.
The formula
Buying a contract at price p that pays $1 on YES: staking f of your bankroll buys f/p contracts, so the net-odds multiple is b = (1−p)/p. Standard Kelly f* = q − (1−q)/b simplifies to:
- f* = yourProbability − (1 − yourProbability) × marketPrice / (1 − marketPrice)
- EV per $1 staked = yourProbability / marketPrice − 1
- recommendedStake = f* × kellyFractionCap × bankroll (default cap: 0.25, quarter-Kelly)
Sanity check: if your probability exactly equals the market price, f* comes out to exactly zero: no edge, no bet, which is the whole point of the formula.
Worked example
You think an event is 60% likely; the market prices it at 40%:
- b = (1 − 0.40) / 0.40 = 1.5
- f* = 0.60 − (1 − 0.60) / 1.5 = 0.60 − 0.267 = 0.333 (33.3% of bankroll, full Kelly)
- quarter-Kelly stake = 0.333 × 0.25 = 8.3% of bankroll
- EV per $1 staked = 0.60 / 0.40 − 1 = +50%
Why quarter-Kelly, not full Kelly?
Full Kelly maximizes long-run growth in theory, but it's extremely sensitive to overestimating your own edge: a slightly-too-confident probability can turn a real edge into a bankroll-damaging stake. Quarter-Kelly (a 0.25 multiplier on the full formula) is a standard, widely-used haircut for exactly this reason, stated explicitly here as a convention, not hidden inside the math. For the actual math behind that tradeoff, how much a fractional-Kelly haircut lowers your risk of a deep drawdown over repeated bets, see the Kelly growth-security frontier calculator.
Get a market price first
This tool needs your own estimate and a market price to compare it against. Pull a live one from Market-Implied Odds or Odds Converter.
Use via API or MCP
Available as a deterministic API call for agents that need to translate a probability disagreement into an actual position size.
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What if my probability estimate is wrong?
This tool can't validate your estimate: it only tells you how much to stake if your estimate is right. Garbage in, garbage out is the biggest real risk here, which is exactly why quarter-Kelly (not full Kelly) is the default: it limits the damage from an overconfident estimate.
Why is the recommended stake sometimes $0?
The Kelly fraction floors at zero whenever your probability is at or below the market's price: there's no mathematical edge to size a bet on, so it says skip rather than force a number.
What's the difference between "edge" and "EV per dollar"?
Edge is the simple percentage-point gap between your probability and the market's (e.g. 60% vs 40% = 20 points). EV per dollar staked accounts for the payout structure too: how much you actually win per dollar risked at that specific price, which is what the Kelly formula uses.
Can I change the Kelly fraction cap from the default 25%?
Yes, via the API (kellyFractionCap, 0.01-1). The web widget uses the standard quarter-Kelly (0.25) default; the API exposes the parameter for anyone who wants a different risk tolerance.