What is Kelly size / recommended position size?
Kelly size is the classic Kelly-criterion bet fraction, computed as f* = (p·b − q) / b, where p is the historical win rate, q = 1−p, and b is the ratio of the average win to the average loss. Quantustik uses half-Kelly — 50% of the full Kelly formula's output — because full Kelly, while growth-optimal in theory, produces punishing swings in practice; half-Kelly gives up only a modest amount of long-run growth for a large reduction in variance. A negative edge (p·b ≤ q) always floors to 0% — the math itself says don't bet.
Recommended size vs. raw Kelly size
Recommended position size is not the raw Kelly number — it is Kelly size scaled down further by the signal's model confidence (so a low-conviction signal gets a smaller allocation even with a decent historical edge) and capped at a hard portfolio limit (default 10% per position, regardless of what the formula alone would suggest). A reading of 0% recommended size, common on weak or negative-edge signals, is Quantustik's math declining to size a trade at all — not a bug.
Live example: AAPL's current Kelly size is 25.0%, and the final recommended position size (after the confidence multiplier and portfolio cap) is 10.0%. See the full AAPL forecast for the trade plan this sizing attaches to.
Why position sizing is risk-first, not an afterthought
Direction without sizing discipline loses money over time: two traders can agree on the same BUY call and have completely different outcomes purely from how much capital each risked on it. Kelly-based sizing ties the bet size to the actual historical edge and current conviction for that specific ticker, rather than a flat percentage applied to every trade regardless of quality.
Frequently asked questions
Why half-Kelly instead of full Kelly?
Full Kelly is growth-optimal in theory but produces large, hard-to-tolerate drawdowns in practice. Half-Kelly gives up a modest amount of long-run growth for a large reduction in variance.
Why is recommended size sometimes 0%?
A 0% reading means the Kelly formula found no positive edge for that ticker's current win rate and risk/reward — the math is declining to size a bet, not a system error.
What's the difference between Kelly size and recommended size?
Kelly size is the raw half-Kelly formula output; recommended size further scales it down by the signal's model confidence and caps it at a hard portfolio limit (default 10% per position).
Educational research only — not investment advice.