* turn a predictive model for financial prices into a profitable trading system
In the case where the bet loses money you can interpret Kelly as either "the only way to win is not to play" or "bet it all on Red exactly once and walk away " depending on how you take the limit.
That is a much narrower view of the Kelly criterion than the general concept.
The general idea is about choosing an action that maximises the expected logarithm of the result.
In practise this means, among other things, not choosing an action that gets you close to "ruin", however you choose to measure the result. Another way to phrase it is that the Kelly criterion leads to actions that avoid large losses.
"The Kelly bet size is found by maximizing the expected value of the logarithm of wealth, which is equivalent to maximizing the expected geometric growth rate"
In real life people often choose to make bets smaller than the Kelley bet. Part of that is that even if you have a good model there are still "unknown unknowns" that will make your model wrong some of the time. Also most people aren't comfortable with the sharp ups and downs and probability of ruin you have with Kelley.
I've long found that Wikipedia article woefully lacking in generality.
1) The Kelly criterion is a general decision rule not limited to bet sizing. Bet sizing is just a special case where you're choosing between actions that correspond to different bet sizes. The Kelly criterion works very well also for other actions, like whether to pursue project A or B, whether to get insurance or not, and indeed whether to sleep under a tree or on a rock.
2) The Kelly criterion is not limited to what people would ordinarily think of as "wealth". It applies just as well to anything you can measure with some sort of utility where compounding makes sense.
The best overview I've found so far is The Kelly Capital Growth Investment Criterion[1], which unfortunately is a thick collection of peer-reviewed science, so it's very detailed and heavy on the maths, too.
It's essential if you want to:
* make money by counting cards at Blackjack (the odds are a function of how many 10 cards are left in the deck)
* make money at the racetrack with a system like this https://www.amazon.com/Dr-Beat-Racetrack-William-Ziemba/dp/0...
* turn a predictive model for financial prices into a profitable trading system
In the case where the bet loses money you can interpret Kelly as either "the only way to win is not to play" or "bet it all on Red exactly once and walk away " depending on how you take the limit.