Risk Of Ruin

Have you ever had a system that has been going really well then all of a sudden things go horribly bad ?

You then have doubts about whether your previously infallible system is intrinsically bad and that your profits up until now have been due to just good luck … or perhaps your system is basically sound and you have just experienced a horror stretch.

Which one it is, is very hard to tell unless you have been using the system for many years and have a statistically significant sample  of past results to feel confident enough to make a call. In addition if you have been using a Progressive Staking Plan  then your losses will probably be much worse and again you will question whether it is the selection plan or the staking plan that is letting you down.

Occasionally on the news you will hear of a fisherman that is washed off the rocks to his death when hit with a freak wave. Actuarially there is no such thing as a freak wave.  It may not occur this week, it may not occur this year but it WILL occur…  you just don’t know when !  Similarly with betting … especially on events where your winning percentage is no better than 20% (ie. average 1 winner in every 5 bets) … there WILL be horror runs of outs and unless you understand the Risk Of Ruin of YOUR particular system then you WILL be in for a nasty shock some time in the future … perhaps not this week, perhaps not next week but sometime !

You may be interested to know that there is a way of predicting what your Risk Of Ruin will be.  Note that the Risk Of Ruin is particularly relevant if  you are using a Progressive Staking Plan because even if your system is earning a very good long-term level stake profit you still may face a very high Risk of Ruin.

What I find amazing is that the majority of people think that by increasing their bets when they are losing,  will somehow increase their overall profit. What they don’t realise is that PROBABILITY HAS NO MEMORY and so what has or hasn’t happened in the past has no bearing on what is going to happen in the future.  And safety brakes such as “Stop when you have lost half your bank” is simply going to delay the inevitable. You would be just as well off making the size of your bets a random number. The bottom line is that unless your long term ER (Expected Return) is positive you will lose in the long term.

Download  Risk of Ruin simulator by clicking on link below
RiskofRuin