The Kelly formula is based on the work of John Kelly of Bell Laboratories in the 1950s on the subject of telephone transmission signal to noise ratio. Professional gamblers and traders use a modified version of the original formula to determine optimal bet size. In this blog I will try to clarify a few issues related to the use of this formula.
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CFTC RULE 4.41
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated performance results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Hypothetical trading results are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
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