Quote:
Originally Posted by soah
If you're paying living expenses out of your bankroll, then you don't have to actually lose all of your bankroll gambling in order to go broke. Beyond a certain point you cannot afford to decrease stakes anymore while still paying the bills, and your risk of ruin becomes enormous.
Of course.
Like I say, you can't really use Kelly to directly calculate poker decisions, I only use it as a bit of a sense check. But arguably it's useless even for that. It's a mathematical rigorous optimal bet sizing for maximising profit growth *in a completely different scenario under completely different conditions*.
It's a decent model for something like horse racing where you can chose your bet sizing every time.
As it happens, aiui in trading even the smart quantitative traders don't actually use Kelly sizing. I think this is because your estimate of your edge is very subjective, and the Kelly sizing is very sensitive to changes, so they tend to use quarter Kelly or something iirc.