Quote from: Millionero on December 29, 2019, 03:01:32 AM

Quote from: Biodom on December 28, 2019, 10:40:56 PM

Quote from: d_eddie on December 28, 2019, 07:30:00 PM

Quote from: Biodom on December 28, 2019, 07:10:19 PM

There is a formula (~~Klein~~ Kelly criterion-see wiki) which describes the % of portfolio one should dedicate to a bet.
The problem is-it involves assigning a probability to a trade success, which is almost always an impossible task.
Example: on a trade with 60% success one should invest 20% of the portfolio; trade with 70% success, 40% of portfolio, etc, etc.
Mind you, these %% are "real" numbers, not imaginary ones.
Also, NO MARGIN.

EDIT:
Formula...Fraction of portfolio to invest (in decimals)=[2X(chance of trade success in decimals)]-1
Therefore, 0% to invest when 50:50 (or lower) and 100% to invest when 100% chance of success.
Everything else-in between.

Actually, at 50:50 ~~Klein~~ Kelly says "invest nothing", right - but if the odds are under 50-50, the Klein criterion suggest the opposite bet should be taken, with an amount again determined by the formula you quoted (it will come out as a negative fraction).

Example: on a bet with 40:60 odds (that's less than 0.5), the criterion suggests 2 * (0.40) - 1 = 0.8 - 1 = -0.2,
that is, invest 20% on the OPPOSITE bet (if anything like that exists).

Thanks, great qualification (re the opposite bet)

https://en.wikipedia.org/wiki/Kelly_criterion

The Kelly criterion applies to "simple bets with two outcomes, one involving losing the entire amount bet, and the other involving winning the bet amount multiplied by the payoff odds" (quoted wiki)

The Kelly criterion may be used in investing, but its application there is much more involved than the simple betting forumula. Wiki has more info.

you're right, bro (re name).
I have some kind of 'last name dyslexia' or something...and I 'infected' d_eddie with it, lol
the formula was right, though.

Darned it, maybe it is another case of "Berenstein Bears" or was it "Berenstain Bears"?
https://news.avclub.com/how-you-spell-the-berenstain-bears-could-be-proof-of-1798282836