We present different methods in the area, over which the Kelly value can be determined. Method 1 is based on the specification of absolute values and determines the result on the basis of the selected parameters. The calculation algorithm for method 2 uses relative values. Interested parties use as a set of parameters predefined values for probability of profit, as well as the relative distribution of transactions in which profit and loss were realized. For all three mentioned ratios, the calculation is based on percentage values.
Formula for determining the Kelly value
Kelly % = P/G - (1-P)/V
When you run your simulations you will notice that when investing in more volatile markets, the financial exposure per individual transaction should be reduced to increase the probability of winning. To illustrate this with an example, you make a profit of+20% and a loss of -10%. This means that even if the profit/loss ratio is the same, you need to reduce the investment amount by half compared to [profit: +10%, loss: -5%] to achieve optimal results.
Please refer to the information on the Kelly's resilience depending on the trading strategy, which we briefly discussed in Method 1.