Kelly tells you how much to stake given your edge. The 5% cap tells you the most you may stake no matter what Kelly says. Those are two different jobs, and the second one exists because the first one depends on a number you do not actually know. This lesson shows the drawdown arithmetic at 5%, 10%, and 20%, explains why the exception you are thinking of is never granted, and covers how to recompute the cap as the bankroll moves.
Kelly assumes you know your edge. You don't.
The Kelly formula is f* = (bp − q) / b, where b is the decimal payoff minus one, p is the true win probability, and q is 1 − p. It is provably growth-optimal, and the proof holds only if p is correct.
