Kelly %

Generic
1

Course Name: Position Sizing in Trading, Section No: 14, Unit No: 6, Unit type: Quiz

I don't think #1 is a right answer, and any other choices don't make sense. In the previous unit (i.e. Unit No: 5), you defined the win/loss ratio as total win divided by total loss. If that still applies, the ratio is calculated 4/3. The probability of win is 2/5 and the one of loss is 3/5. These boil down to -0.05 Kelly % which doesn't make sense. Can you clarify this problem?

2

Hi Yuki Harunari, 



Thanks for pointing out the inconsistency.



The win/loss ratio (R) is defined as the ratio between the average profit in winning trades and the average loss in losing trades. 



Win/Loss ratio (R) = Average profit / Average loss



so, for unit 5 and unit 6,



Win/Loss ratio (R)  = 20/10 = 2.



The changes have been made in unit 5 accordingly. 



Using this win/loss ratio, the answer for unit 6 would be 10% as explained in the result.



Thank you