> Something seems wrong with this equation. As
> my average losing trade get bigger, the
> Kelly value also gets bigger, not smaller as
> I would assume.

No, it's correct. If you can forge an advantage despite losers being larger than winners, it means that you win with great frequency and that prolonged losing streaks are rare. That's what makes it good in terms of Kelly.

On the contrary, if your winners are huge, like long shots at the racetrack, but you win very infrequently, it means that you have long losing streaks, and the Kelly fraction has to be reduced.

Don