Learn prop trading · lesson
The ideal bet size on a prop account
Most traders have never heard of the Kelly criterion — the formula professionals and fund managers use to size positions from their actual edge. Most retail traders unknowingly trade at 5–10× the mathematically optimal size, which is why good strategies still blow evaluations.
The formula
K = W − [(1 − W) ÷ R], where W is your win rate and R your average reward:risk. Example: 40% win rate at 1:3 → K = 0.40 − (0.60 ÷ 3) = 0.20. Kelly says your edge justifies risking 20% of capital per trade — as a theoretical MAXIMUM, not a suggestion.
Full Kelly is too aggressive
Full Kelly maximises long-run growth but the variance destroys you psychologically — and destroys a prop account's drawdown limit long before the long run arrives. Professionals run HALF Kelly (roughly 75% of the growth for half the swings) or quarter Kelly. On a prop account, the drawdown rules make anything above that suicidal.
Applying it to a $50K challenge
Say the max drawdown is $2,000 (4%), you win 40% at 1:3. Kelly = 20%, half Kelly = 10% — of your REAL capital, which on a prop account is the drawdown, not the balance. 10% of $2,000 = $200 risk per trade; conservative quarter Kelly = $100. That's 0.2–0.4% of the nominal account — and it's why the pros you see passing consistently risk 'so little'.
The reality check
Risking 1% of a $50K account is $500 — a quarter of the whole drawdown on one trade, or 250%+ Kelly for the profile above. Four losers in a row (a certainty at 40% win rate) ends the account. The eval isn't testing your entries; it's testing whether you can size like a professional.
Theory is cheap — check it against real program rules.
Test your sizing in the pass simulatorEducational content, not financial advice. Formulas assume independent trades and honest backtests; real trading is streakier. Never risk money you can't afford to lose.