My personal interpretation of Kelly is that it's best applied to mathematical systems. Trading systems which are not purely mathematical would not benefit from Kelly. A mathematical system is one where you can calculate your edge based on math. Using a simulator can then help you confirm the math. When I toke up Black-Jack, the conventional wisdom was that you'd need something on the scale of a Million-**Independent Events/Trials** to get a good handle on your edge. Not to mention Blackjack is a game which can be Proven Mathematically.

So again unless you have a Static Market or Static System, Kelly would not help you. All it can do is help you curve fit some-more. Example: you run a 10 year back-test on Independent Trades (non-series like trades), you have a fixed lot-size during your initial test (without any money-management). Now you can use Kelly here to answer "What fraction of my Equity/Margin/Risk-Per-Trade -giving this setup- would be Optimum (not too large and not too small) ?" <-- This is where Kelly can help you, within the back-tester. Obviously if the test ends with a profit less-than 0 then Kelly will tell you to wager 0, as you're playing a losing game.

If somehow the
statistics
from the Tests **will** stay the same in the future (strongly doubt it), then bingo, even I can't argue with Kelly there. So yea, you're making a mistake by using Kelly on anything less then a Huge-Number-Of-Trades, you need the number of trades to be so big that the probability of Luck/Curve-Fit is un-likely. I'll go with Blackjack's approach here and say a couple million
non-series
(not---grid/martingale/pyramid/partial-close etc) trades. That or find a purely mathematical approach and use your Kelly with that.

If I was to employ Kelly, I'd use 25%-50% the Kelly recommendation based on my All-Combined Years/Symbol back-test. I'll not use it as some form of Recent Trades (System in the Zone) indicator. <---- You can try looking at WHRoeder's code and searching for Trade Encourage Factor ... But all these thing are Theoretical. But even with 100-years of trades and employing Kelly, I wouldn't dare fool myself into thinking A) the account cannot go broke. and B) I'll always be able to take small (or large) consistent profits from the market. My personal psychology on Forex is that 1) I'm here to make money and 2) If I'm not willing to lose it, it wouldn't be in the Account.

Hi,

Have been testing Kelly MM, the results have been mixed but overall there seems to be more profit and less DD and losses.

But... I've sampled less than all trades, typically the 6 - 30 last trades were used in the Kelly calculations.

Hard limit was set at 0.3 x Kelly, although I've seen the EA trade 'well' and survive with up to 60% risk pr. trade (!).

Now... with a limited number of Kelly-samples (as mentioned above) the Kelly will tend to saturate, this always happen on

long loosing or winning streaks. Eg. if I use 6 Kelly-samples and those trades were all losers, Kelly wants to trade with 0% risk.

This is something I can agree to. But if those trades were all winners Kelly would want to trade with 100% risk... very profitable

but in the real world obviously this is all wet and all wrong.

Using a Kelly factor of 0.2 or thereabout goes a long way to approach reality (if you have the stomach to trade @ 20% risk)

but I still feel there is something missing... as if the Kelly is incomplete or unfinished...

Any views and suggestions ?