Position sizing is the link between emotional and financial capital

"This is a great experiment for many reasons. It ought to become part of the basic education of anyone interested in finance or gambling."

– Edward Thorp, a (super)man for all markets

Victor Haghani, founder of Elm and former trader at LTCM, conducted an experiment on 61 volunteers, bright students in finance and sophisticated investment professionals. Participants were given $25 starting capital and were told to flip a virtual coin for 30 minutes, being told, "the coin is biased to come up heads with a 60% probability, and you can bet as much as you like on heads or tails on each flip." How much would you bet? It appears there is a formula to calculate the optimal bet size that would maximize long-term geometric returns. The Kelly criterion formula is:

def kelly(win_rate,avg_win,avg_loss):  
    # Kelly = win% / abs(avg_loss%) - loss% / avg_win% 
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