The Kelly Criterion formula
The final simplified version of the Kelly Criterion formula is: K% = W – Where: K% = Optimal percentage of risk per trade. W = Your winning probability. R = Win/loss ratio also known as risk/reward. The Kelly Criterion MT4 indicator estimates your risk reward and profitability based on at least 10 past trades of a specific instrument automatically.
Kelly Criterion examples
If your probability of winning is 60% and your risk/reward is 1:1.5. The optimal amount you should risk according to Kelly Criterion is 33%. If your probability of winning is 70% and your risk/reward is 2:1. The optimal amount you should risk according to Kelly Criterion is 10%.
How to use Kelly Criterion in Forex
The Kelly Criterion is designed for mathematical systems based on at least 50 bets and assuming that future bets will have the same probability of winning and reward.
In Forex, however, things sometimes can go bad and quite fast. In addition, there are varying spreads, human emotions, and simple mistakes. Therefore, we have added to the Kelly Criterion MT4 indicator two ranges. One for conservative trading and one for aggressive trading styles.
In order to increase the reliability of Kelly Criterion in Forex, you should: Be consistent with your trading strategy and style. Have a large history of trades, preferably >50. Have Stop Loss levels at all times. Trade at the conservative risk range. You should also be experienced in trading Forex, otherwise, you risk crashing your account.
Download Kelly Criterion MT4 indicator
You can download Kelly Criterion MT4 indicator for free by clicking the “Download” button located at the bottom of the screen.
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How do you install an indicator on MT4?
In order to install this indicator on your MT4, you need to:
1. Click on “Download” button above to download Kelly Criterion .ex4;
2. Save the file to your computer;
3. Extract and move the files into:
4. Restart your MetaTrader platform;
5. Click “Indicators” button in MetaTrader toolbar;
6. Select “Custom”;
7. Search and select “Kelly Criterion" .ex4 indicator;
8. Adjust settings or press OK to add the indicator to your selected chart; This MT4 Forex tool has a set expiry data. To reactivate it later, please place a sent key file to MQLFilesAtoZ LicenseProduct Code.
Note: Kelly Criterion MT4 indicator was developed by AtoZ Markets. AtoZ Market carry copyrights over this trading tool.
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