ROR, Risk or Reward?

[blackjack avenger]

or
An 8 on it's side is infinity!

So many times on this site a new player is overbetting or trying to justify overbetting.

I stand proudly on my soap box and I cry out!
I say no more! No more ror!

If your bank is large and/or you are making more then twice your day job, then eliminate risk and only receive reward. How? Play 8th kelly resizing, don't even lose half. 6th kelly would do it; if you resize constantly, very difficult in the real world. Don't change stakes and let your bank grow until nothing can beat you, until you are at the infinity of 8th kelly. Have a CE (certainty equivalent) of not going broke and only realizing gain over time. Why not be able to win till infinity! Table max's limit us anyway; we have a ceiling, avoid hitting the floor once your EV has you floating on air.

What is the opposite side of these statements? To have an ror :sad: or risk of large drawdow when you have the best of it?

Psssss, a few secrets
Probably most aspiring APs fail due to overbetting or large drawdowns.
&
I would imagine all pros have 0% ror or even risk of large drawdown.

good cards, good CE
:joker::whip:

 

[gamblingghost]

Infinity of 8th kelly. hmmm, how many max. bets is that?

 

[blackjack avenger]

Max Who?

Infinity of 8th kelly. hmmm, how many max. bets is that?

Not sure on the max bet answer. If you know what a kelly bank is? 13.35% ror, well it's 8 of those. Once you get to 8th kelly resizing, as you win and lose resize your bet ramp at whatever intervals you wish. This is not about maximizing growth, it's about lowering variance, lowering NO and eliminating ror and large drawdowns.

:joker::whip:
good cards

 

[blackjack avenger]

Infinite Camoflauge With 8th Kelly Resizing

Buying in big, even if losing
Betting big
& winning big all can cause heat.

Some players will keep their bets low as a form of camoflauge, bet what the casino will tolerate. Applying 8th kelly also has a longevity component, by being conservative you will be betting smaller while having no ror, risk of large drawdown and having a CE of winning.

As opposed to

Betting a high fraction of kelly, losing because you have allowed variance to be a factor in your play and getting barred because of your large bets drawing heat. Then when you need to play the most, you have lost
casino(s).

With 8th kelly resizing one will still be eventually betting big but those bets won't be sooooo stressful because of little risk of large draw down.

So there is a subjective longevity gain by betting 8th kelly. If just the math rationale is not enough.

So with 8th kelly resizing one can win (conquer variance) while limiting getting kicked out, isn't that the idea?

What is the opposite point of view? Bet big, risk variance of a large drawdown or ror and risk getting kicked out? sad face

:joker::whip:
good cards

 

[sagefr0g]

sorry zg-woof

damm, sounds good to me.

 

[gamblingghost]

Max Payne!

Not sure on the max bet answer. If you know what a kelly bank is? 13.35% ror, well it's 8 of those. Once you get to 8th kelly resizing, as you win and lose resize your bet ramp at whatever intervals you wish. This is not about maximizing growth, it's about lowering variance, lowering NO and eliminating ror and large drawdowns.

:joker::whip:
good cards

Because this is a pain to figure out for practical application. Here is what I got. One needs 75 max. bets for a 12.6% chance of ruin with and E of 1.67%. So, 8 of those is 600 Max. bets. hmm, 200 more than I hoped it was. But you are going with a little less than that. So, I would say when your max bet is as high as you will ever can or will take it, with about 500 max bets the BR is damn safe....if you are playing with a pos. E of course. A huge BR is no excuse for sloppy play.

 

[aslan]

damm, sounds good to me.

Past posting is a lot safer.

 

[gamblingghost]

Past posting is a lot safer.

yeah, if ya don't get caught. So, Mr. Aslan, if I may ask, what size
BR are you comfortable with? I've seen such horrible neg. variance that
I'm just plain gun shy. I don't need 500 max bets but it sure is close.

 

[blackjack avenger]

A Sixth Sense is Not Enough

1/6th kelly, played perfectly and resizing constantly is enough to not lose half of bank. 1/8th kelly takes into consideration the real world element:
Human errors
Various camo
Not resizing constantly
Taking money out
Not losing down to table minimums

The problem with lesser amounts is variance can still be an issue. If you pick 1/4th kelly resizing one still has a .008% technically, but real world possibly 1% to 2% chance of losing half and that is with resizing. If you lose half are you then going to resize down bets more seriously? Welcome to :devil:HELL NO:flame:, where you have to win many more bets then you lost in order to get back to to EVEN:sad::whip:!

One can probably drift between 6th and 8th kelly resizing, resize bets up when you reach 8th kelly back to 6th or 7th kelly. Eliminate variance and just earn.

:joker::whip:
good cards

 

[blackjack avenger]

Avoiding Payne

Because this is a pain to figure out for practical application. Here is what I got. One needs 75 max. bets for a 12.6% chance of ruin with and E of 1.67%. So, 8 of those is 600 Max. bets. hmm, 200 more than I hoped it was. But you are going with a little less than that. So, I would say when your max bet is as high as you will ever can or will take it, with about 500 max bets the BR is damn safe....if you are playing with a pos. E of course. A huge BR is no excuse for sloppy play.

Yes, I agree with everything you have written. I should expect no less from someone with the charisma and intelligence to use Halves.:laugh:

One can decide to not bet bigger due to table max's etc. However, one could also choose to place top bets sooner or let top bets ride if still positive even if count drops. This will hurt NO, but your near infinite 8th kelly resizing bank can take it. The bank acts like an infinite bank where you can chase raw ev at the cost of game quality like SCORE, score and NO.

good cards
:joker::whip:

 

[sagefr0g]

Past posting is a lot safer.

yup but only in a literal sense.
otherwise, to confining.:laugh::devil::whip:

 

[aslan]

1/6th kelly, played perfectly and resizing constantly is enough to not lose half of bank. 1/8th kelly takes into consideration the real world element:
Human errors
Various camo
Not resizing constantly
Taking money out
Not losing down to table minimums

The problem with lesser amounts is variance can still be an issue. If you pick 1/4th kelly resizing one still has a .008% technically, but real world possibly 1% to 2% chance of losing half and that is with resizing. If you lose half are you then going to resize down bets more seriously? Welcome to :devil:HELL NO:flame:, where you have to win many more bets then you lost in order to get back to to EVEN:sad::whip:!

One can probably drift between 6th and 8th kelly resizing, resize bets up when you reach 8th kelly back to 6th or 7th kelly. Eliminate variance and just earn.

:joker::whip:
good cards

So what do I need, $80,000, to play a $10 game at 1/8 Kelly?

 

[aslan]

yup but only in a literal sense.
otherwise, to confining.:laugh::devil::whip:

Yeppers to the confinement element. That's what's kept me playin' on the wide open range, Pardner.

 

[sagefr0g]

did Kelly mathematically crack psychology

hmmm, bja's stuff got me curious, actually i've never paid any attention to whatever fraction of kelly when messing with cvcx, i've just always tinkered with the min bet size and spread manually to find my comfort zone.
so anyway cause of bja's stuff i went ahead and tinkered with the fractions of kelly in cvcx.
turns out setting the kelly factor to 0.33 gives me exactly what's always been my comfort zone, same as that scenario i came up with tinkering with the min bet size manually.
but here is where it get interesting, lol, errhh i dunno if it's conformation bias or waht but....... from:
http://www.bjmath.com/bjmath/kelly/kellyfaq.htm (Archive copy)
note the abstracted stuff (bolded factor number):

Q2: What is the "Kelly Criterion" and what are "Utility Functions"?

A2: The Kelly utility function and other utility functions give a economically justified and mathematically precise way to compute optimal bets that leads to large winnings but limits the total amount of risk. The Kelly criterion dictates that you should try to maximize the expected logarithm of your total bankroll rather than trying to maximize the expected bankroll itself. In other words, you should try to maximize the exponential rate of bankroll growth.

Many systems tell you to bet an amount that is proportional to your bankroll but the Kelly criterion is best among these in that as the number of bets you make increases, the chance that Kelly betting will beat these other systems approaches 100%. Nonetheless, the Kelly utility function is considered too risky by many professionals and another utility function is used instead.

The function log(x) is called the utility function of the Kelly criterion. It corresponds to a "Kelly Number" of 1. Another utility function is x^(1-1/k) / (1-1/k) for k = 0.3. It is the utility function that corresponds to a Kelly Number of 0.3. Either of these utility functions is useful in evaluating how much a particular proposition is worth to you. This worth is called the "Certainty Equivalent" and it provides a way to compare different bets and betting strategies.

Q3: What is "Certainty Equivalent"?

A3: Would you rather make a bet of $200 on a coin flip with an average profit of $20 or accept $5 risk-free? Would $10 risk-free persuade you not to make the bet? How about $15? Your "certainty equivalent" (or risk-free equivalent) is the amount that participation in the bet is worth to you. -- perhaps $5, $10, or $15 in this example.

The Kelly criterion with Kelly number 0.3 advises you to maximize the expected value of u(x) = x^(1-1/k) / (1-1/k), where k = 0.3 and x is your resulting bankroll. If your bankroll is $10,000 then the $200 bet gives an average value of u(x) of

55% * u(10200) + 45% * u(9800) = some number

If instead you were offered an amount "CE" risk-free the average value of u(x) would be

100% * u(10000 + CE) = some other number

These two expressions are equal when CE = $13.38. This is the "certainty equivalent" of the above bet for you if you are a Kelly better with the Kelly Number 0.3 and with a $10,000 bankroll. This amount, $13.38, is how much participation in the bet is worth to you. In particular, if the CE for this bet were negative the bet would be worth a negative amount to you and you should avoid it if possible.

weird, just a coincidence or is this utility function that good.

 

[sagefr0g]

????

ok here's a question, errhh whatever i've never fully understood what the heck does "maximize the expected logarithm of your total bankroll" mean?
what the heck is an expected logarithm of a bankroll?
or is there even such a thing, what's it mean, how's it tick, lol......
or can anyone explain the concept from a layman's perspective?
errh, i sorta half a$$ know what logarithms are.......

from: http://www.bjmath.com/bjmath/kelly/kellyfaq.htm (Archive copy)

Q1: What is wrong with maximizing your expected winnings?

A1: Although at first glance it seems obvious that it is best to maximize the expected (i.e., predicted average) amount of your winnings, this is in fact not true for most people. If this were really your goal then whenever you had the slightest advantage you would mortgage your house, car, and boat and bet your entire fortune. Although this gives you the greatest net win, on average, this is entirely too risky for most people.

Q2: What is the "Kelly Criterion" and what are "Utility Functions"?

A2: The Kelly utility function and other utility functions give a economically justified and mathematically precise way to compute optimal bets that leads to large winnings but limits the total amount of risk. The Kelly criterion dictates that you should try to maximize the expected logarithm of your total bankroll rather than trying to maximize the expected bankroll itself. In other words, you should try to maximize the exponential rate of bankroll growth.

 

[blackjack avenger]

Certainty of Playing, Winning or Don't F### Up

So what do I need, $80,000, to play a $10 game at 1/8 Kelly?

The short answer is yes, if they value that approx $50 ev.

Let's say they have a job. I don't know say mopping floors at $15 an hour.

They start to play with a kelly or 1/2 kelly bank. As they win if they resize their bets up they have a chance of variance knocking them back to below $15 an hour or even out of the game due to table minimums:sad:. So perhaps since they have such an opportunity to make $50 an hour they should not risk messing it up until they win to 1/8th kelly, then they can raise stakes to make more.

An investment theory is to be more conservative with larger sums of money. Once one starts to win be conservative as the bank grows from kelly to 1/2 kelly on up the ladder to 1/8th kelly and then start to raise stakes for higher returns.

So, once one is earning twice their job hourly ev. Don't raise stakes until you get to 1/8th kelly, then raise stakes.

Finally, if you are trying to be a pro; with or without expenses and no other source of income, you should really consider 1/8th kelly, if you want to be near assured of survival.

good cards

 

[blackjack avenger]

.3333333333333 I Hate Repeating Decimals!

hmmm, bja's stuff got me curious, actually i've never paid any attention to whatever fraction of kelly when messing with cvcx, i've just always tinkered with the min bet size and spread manually to find my comfort zone.
so anyway cause of bja's stuff i went ahead and tinkered with the fractions of kelly in cvcx.
turns out setting the kelly factor to 0.33 gives me exactly what's always been my comfort zone, same as that scenario i came up with tinkering with the min bet size manually.
but here is where it get interesting, lol, errhh i dunno if it's conformation bias or waht but....... from:
http://www.bjmath.com/bjmath/kelly/kellyfaq.htm (Archive copy)
note the abstracted stuff (bolded factor number):

weird, just a coincidence or is this utility function that good.

1/3 kelly resizing is a nice number. In many ways it's close to 1/8th kelly resizing. However, you have a chance of losing half, of VARIANCE:whip:What happens if one loses half their bank?
Do they drastically cut bets and enter NO HELL:flame::whip:
Do they tap out due to table minimums?
Can they psychologically handle it?
Are they knocked out because the ev is now not worth it?
Does the mrs:cat: put an end to the foolishness?

I hate variance, many posts and threads are written about it. 1/8th kelly is how you conquer it.

:joker::whip:
good cards

 

[gamblingghost]

Yes, I agree with everything you have written. I should expect no less from someone with the charisma and intelligence to use Halves.:laugh:
One can decide to not bet bigger due to table max's etc. However, one could also choose to place top bets sooner or let top bets ride if still positive even if count drops. This will hurt NO, but your near infinite 8th kelly resizing bank can take it. The bank acts like an infinite bank where you can chase raw ev at the cost of game quality like SCORE, score and NO.

good cards
:joker::whip:

Charisma, yeah that comes naturally. Intelligence!!?? to use halves? Here is what I have to say about halves. Many, many moons ago I got a beautiful black book with gold writing on the cover. SW authored it. He has two systems in it and I had to pick one. Halves required the same amount of memorizing from tables. The same efficiency with insurance decisions. Halves is a tad more difficult to count but adds .1 bets per hour. At this point it seemed trivial. Each system with an additional count per deck gives an extra .56% advantage BUT hi-lo has a standard deviation of .22%. Halves only .06%!!! THAT sold me. Halves makes almost NO errors in estimating advantage. The numbers are also relatively SMALL and that is much easier for me to count. I can say in my mind "and a half" without any problem as needed, easy!! For me, yes, an intelligent choice.

 

[sagefr0g]

1/3 kelly resizing is a nice number. In many ways it's close to 1/8th kelly resizing. However, you have a chance of losing half, of VARIANCE:whip:What happens if one loses half their bank?
Do they drastically cut bets and enter NO HELL:flame::whip:
Do they tap out due to table minimums?
Can they psychologically handle it?
Are they knocked out because the ev is now not worth it?
Does the mrs:cat: put an end to the foolishness?

I hate variance, many posts and threads are written about it. 1/8th kelly is how you conquer it.

:joker::whip:
good cards

the mrs puts an end to the foolishness....
but heck if i go to 1/8 in cvcx, errh my spread doesn't change, it stays the same as 0.333 .....
errhh, at some point resizing downward is a no go, no?:whip:

 

[blackjack avenger]

Maximize Infinity & Variance

ok here's a question, errhh whatever i've never fully understood what the heck does "maximize the expected logarithm of your total bankroll" mean?
what the heck is an expected logarithm of a bankroll?
or is there even such a thing, what's it mean, how's it tick, lol......
or can anyone explain the concept from a layman's perspective?
errh, i sorta half a$$ know what logarithms are.......

from: http://www.bjmath.com/bjmath/kelly/kellyfaq.htm (Archive copy)

Isn't it the fastest growth rate given risk? In theory on an INFINITE time line a kelly bettor outperforms.

Some problems with the above:
Table minimums
Finite timeline
Human frailties
Inability to constant resize

Also,

If you bet over double kelly resizing your bank shrinks
If you bet double kelly resizing your bank does not grow
If you bet either .5 kelly resizing or 1.5 kelly resizing your bank has the same growth rate but with 1.5 kelly resizing you have much more variance.
If at kelly resizing you place one bet that is over kelly your SCORE goes backwards.

All the above have something in common, VARIANCE:whip:.

The smaller fractions of kelly resizing short of 1/6th in theory still have a chance of losing half and in the real world even higher. At around 8th kelly in the real world is when you finally start to get the better of VARIANCE:whip:.

:joker::whip:
good cards