Alexander J235_ Davis

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What is Kelly Criterion and how is it applied in forex money management?

The Kelly Criterion calculates optimal bet size to maximize growth while minimizing ruin. Formula: f* = (bp − q)/b, where b = odds, p = win probability, q = loss probability. In forex, traders can adapt it by estimating expectancy. Benefits: maximizes long-term growth mathematically. Risks: aggressive sizing leads to high volatility—many use fractional Kelly for safety. Institutions use Kelly-based models in portfolio allocation. Retail traders can simplify by sizing trades at half or quarter Kelly to smooth returns. Kelly teaches that money management is mathematical, not guesswork—sizing defines survival and growth.