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@Dailyairdrop3

Dec 3, 2020

Amazing thoughts regarding Kelly, can you pls enlighten us which way is the right way for people to bet?

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Replying to @RPC_20 @crypto_rohan and @danrobinson

1) it's way too conservative for many people 2) it contains strong assumptions about infinitely repeated identical bets that you can't have an adaptive strategy with, none of which describe the real world 3) it's scale-invariant in a way that is inconsistent with its sublinearity

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eh really depends on your specific situation! but generally I'd say that you should focus primarily on maximizing EV, and secondarily on undertanding your risk limits, rather than curtailing EV for risk reasons in cases where the risk isn't that bad

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I'm surprised you said Kelly is too conservative for most. I thought going full Kelly risks blowing up your portfolio if you overestimate your edge. (Of course, if you include human capital, Kelly is probably too conservative for a young person's portfolio.)

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I learned the same thing reading the trading wizards books, most of the wizards trade at max half a Kelly but I guess they focus mainly on capital preservation. I think focusing on EV instead of curtailing risk is a good strategy when trying to catch "once in a lifetime market