When the price of the stock is lower compared to the value of the stock you buy more. If you have a portfolio of stocks and you use equal weighting than each slot has the same size. With Kelly weighting you increase the size of that slot when you expect more gains.
I kind of use this: when a stock has a price of 0.45*value I use a weighting of zero. When 0.40*value the weigthing is 0.10 times a function of the slot size. When 0.30*value the weighting is 0.25 etc.
So when buying something you have a feel for the size.
Lichello will tell you that you have a buy and Kelly can help with sizing. Lichello is a hard formula and Kelly is more intuitive for me.
A typical Value weighted index might allocate relatively more to stocks with a lower Price to Book Value and less to stocks with higher price to book.
Cap weighted allocates more to stocks with a higher market capitalisation value, less to smaller stocks.
Equal weight just weights each stock equally.
Kelly's formula is just a way of putting mathematical figures/amounts based on probabilities - risk more if the chance of a win and payout are relatively high, risk less if the odds are less favourable. Don't risk anything if the odds are 50/50.
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