---
title: "Kelly criterion - Meaning & GFN's Figure - Get Funded Now"
description: "A formula giving the position size that maximises long-run growth for a known edge. Its output is far too large for real trading, because the inputs are…"
url: "https://getfundednow.com/glossary/kelly-criterion"
language: "en"
last_modified: "2026-09-22"
publisher: "Get Funded Now (getfundednow.com)"
translations:
  es: "https://getfundednow.com/es/glossary/kelly-criterion"
  pt-BR: "https://getfundednow.com/pt-br/glossary/kelly-criterion"
  fr: "https://getfundednow.com/fr/glossary/kelly-criterion"
  it: "https://getfundednow.com/it/glossary/kelly-criterion"
  de: "https://getfundednow.com/de/glossary/kelly-criterion"
disclosure: "All trading at Get Funded Now is simulated. 'Funded' means a simulated or virtual account; GFN is not a broker and does not hold client funds."
---

Strategy and performance

# Kelly criterion

A formula giving the position size that maximises long-run growth for a known edge. Its output is far too large for real trading, because the inputs are estimates and the drawdowns it accepts are extreme.

GFN’s figure

Kelly-sized positions are incompatible with a fixed floor: GFN's 8% 2 Step drawdown allows four consecutive 2% losses, and full Kelly routinely implies far larger fractions than that.

In detail

## Kelly criterion, explained

Full Kelly assumes the win rate and payoff are known exactly. They never are, and overestimating an edge by a small amount produces a position size that is catastrophically wrong.

Most practitioners use a fraction - a quarter or less - which lands close to the 0.5% to 1% risk per trade that a prop account's drawdown floor makes practical anyway.

[Rules handbook](https://getfundednow.com/rules) · [More strategy and performance](https://getfundednow.com/glossary/category/strategy)

Related

## Terms that come with it

Most rules only make sense next to the ones they interact with. These are the entries this one depends on.

- [Fixed fractional](https://getfundednow.com/glossary/fixed-fractional) - Risking a constant percentage of equity on every trade, so position size falls after losses and rises after gains. It is the standard position-sizing model and the one most prop rules assume.
- [Position size](https://getfundednow.com/glossary/position-size) - How many lots a trade is placed in. It is calculated from the dollar amount being risked and the stop distance, not chosen first - which is the reverse of how most traders approach it.
- [Risk of ruin](https://getfundednow.com/glossary/risk-of-ruin) - The probability that a sequence of trades takes an account to its breach level before it reaches its target, given a win rate, a reward-to-risk ratio and a risk per trade. It is driven mostly by position size.
- [Expectancy](https://getfundednow.com/glossary/expectancy) - The average result of a trade over a large sample, combining win rate and average win and loss. A positive expectancy is necessary for a strategy to work and not sufficient for it to pass an evaluation.
- [Maximum drawdown](https://getfundednow.com/glossary/maximum-drawdown) - The total loss an account may take before it is failed. Expressed as a percentage of the starting balance, it sets a floor: touch it and the account breaches, whatever the account has made up to that point.

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Source: https://getfundednow.com/glossary/kelly-criterion
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