Risk of Ruin in Online Gambling
Casino players in general are categorized as risk takers. Whether you play cautiously or with reckless abandon, the only way to play is to deposit your money and make a bet, and with every bet you place, there is always the risk of loss.
As player it is therefore important to identify how much money you are prepared to spend on funding your casino bankroll, or put another way, how much money you are willing to potentially lose. Then determine what type of player you are by answering a simple question – on a scale of zero to ten where zero is never and ten is always, how likely are you to go for broke when playing at a casino. This will tell you whether you're a cautious player or someone who throws caution to the wind in the quest for that big win.
Generally amateur players rate themselves higher on that scale than professional gamblers do. This is generally because most of us will set aside a small amount, say $20 per week to play with and we're happy to lose it all just for the entertainment value it affords us, and of course the opportunity to win that life changing sum.
For the professional gambler however, making a profit is the name of the game and this means that they need to continually win in order to protect their bankroll and a reasonable Risk of Ruin (RoR) must be as close to zero as humanly possible to ensure this.
Determining Risk of Ruin
Risk of Ruin is a term you've probably heard in finance, but it applies to gambling too and is not an abstract notion. It is an actual statistical value that is described as the probability of a person losing enough gambling or finance capital to the extent that it is unwise or inconceivable to continue in an attempt to recoup losses. The RoR figure is generally expressed as a decimal figure or percentage.
To determine the RoR figure, one needs to know the probability of winning and losing as well as the amount of your capital (or bankroll) that is in jeopardy. You will also need to know the variance of the game you are playing, the house advantage in it and the expected value offered. It may also be useful to know the number of hands or spins that you play per gaming session.
When calculating the RoR using logarithmic functions, the mathematics within the calculation may become too complex for the average player. This means that most players generally use an automated RoR calculator or table than manually workout the calculation. Once you've calculated your RoR figure, you can use it to test earning objectives and of course, ensure the survival of your bankroll.
Applying Risk of Ruin in Online Gambling
The first way that RoR can be used is to calculate the probability of reaching a specific profit goal before your bankroll is depleted, regardless of the number of spins or hands played before this happens. In the majority of instances, this analysis can reveal flawed gaming strategies or unrealistic goals.
For example, an ambitious Roulette player at the European Roulette tables may wish to double his/her thousand dollar bankroll by wagering $50 per spin on either Red or Black. In these circumstances, RoR tables show that the probability of going broke before meeting this goal are 91.5%, which in essence is not a very obtainable goal. The more realistic play would be to bet the full $1000 on a single spin which carries a Risk of Ruin of just 52.6% ‐ similar to that of a coin flip and with way better odds than the former scenario.
Establishing a Risk of Ruin also helps players focused on certain goals to identify the levels at which their objectives have become unrealistic and warrant quitting in order to retain their profitability or it may help them to modify wagering and game strategies, giving up making low probability bets with the possibility of large rewards, in favour of the higher probability wagers offering smaller, but more frequent payouts.
As previously mentions, RoR also helps players to ensure the survival of their bankrolls. So the same player in our above example may enjoy the game so much that switching from multiple bets to just one as the table suggests is not an option. In this instance, it does bare mentioning that the risk of ruin in chasing that two thousand dollar goal drops from 91.5% to a mere 7.5% if trying to achieve this goal is limited to fewer than 100 spins. If the player gets lucky during his/her run then the goal will be met, and if not, the losses may be limited to less than the full bankroll amount.
While establishing Risk of Ruin figures may seem a little unnecessary to the average player, if you are playing with long term profitability rather than just entertainment in mind, this may be worth investigating and applying in your own game play.