Unable to find the Risk of Ruin calculator.

As to the Grade 3 schoolboy (with the guide in his pocket):

Say, for example, you had a method with a 1 in 100 strike rate, but it was beautifully profitable with an average dividend of $1000. Well, you still have to consider money management and prepare for runs of outs. Say your bank is $1000. Even with this superlatively profitable system you can't go having 5% of your bank on them, because at some point you WILL hit a run of outs of 20, destroying your bank. The likelihood of a run of outs of 20 is 82% (0.99^20).

So, say you bet 1% of your bank. The likelihood of beginning a run which would wipe it out is still high, at 36.6%. (0.99^100). So, on average, with a s/r of 0.01 you are going to begin a streak of 100 losses every third bet or so. Not sustainable at 1%.

All right - 0.1% of your bank is the bet. In order to wipe it out, you need to have 1000 losses. Chances of that - 0.004%. (0.99^1000)

@@@@!!!!!!!!!!!!!!!

That's a massive difference!!! Suddenly, with this, your chances of wiping out your bank are merely 1 in 23,000 or so!!

So, is that the right bet size? 0.1%? Or is it something slightly more, or less? WHAT FIGURE IS THE RIGHT FIGURE TO BEGIN BETTING WITH???

That is the essence of the question I am asking. It is merely what is sensible, given a strike rate, to use as an outlay figure, given a strike rate. I think perhaps what people are forgetting is that this question is not entirely mathematical. In working out what is "sensible", part of the consideration is determining what you as a punter can handle losing of your bank before you strip off and start pacing the living room, bottle of scotch in hand, quoting from Kerouac's On the Road.

We need to consider the psychology of it: ie, what can we handle, before we do our banana?

In that respect, I again applaud what Baghwan said, for in that is some truth. He said that your bank should be 3.5 times what you can reasonably foresee as a losing streak. I myself had been thinking along the lines that if my worst losing streak only wiped out a quarter of my bank, I'd be fine. THAT'S the logic behind figures like the 3.5 of bank etc. This is what I mean when I say it's NOT a purely mathematical question. People forget that we are humans with human frailties and the best test and strain of these frailties is a long losing streak. Trust me, like no doubt all of you, I've been through them. The biggest test of a method is how is stands up while the selections are falling down.

So, like the Castle built on the hill for extra fortification, I only want 25% of my bank to be lost in the longest forseeable losing streaks.

In that case, if your bank is $1000 and your longest forseeable losing streak (LFLS so I can stop typing it) is 50, then your bet size $5, or 0.5%.

Problem is, HOW does one calculate the LFLS??? What is reasonably foreseeable?

I take Crash's and others' point that the LFLS depends on how long you bet, so in this case let's say 10 years. We live under the decimal system, everything is 1's and 0's, so let's say 10 years.

With that in mind, next thing we need to quantify is number of bets in the 10 years, so - 200 per week, strike rate 10%, let's work it out on that. (I know, 200 per week, shock horror, let's just go with it).

Therefore, 200 bets per week, lets round that to 10,000 per year, 10 years, 100,000. It all fits nicely in the decimal system.

So, strike rate 10%, 100,000 bets, what are the chances of a run of outs of 100?

Well, the chance of a run of outs of 100 at any given time with a strike rate of 10% is 0.9^100, or 0.002656%, or 1 in 37648. So, reasonably, you can expect 3 of these such runs in a 100,000 bet run. In that case, if that is the maximum run of outs you can "reasonably" expect, then your bet size should be 0.25% of your bank, given that you only want to lose 25% of you bank in this longest run of outs.

But can you expect worse than that?

What's the probability of a run of outs of 200? It's 0.9^200, or 0.00000007055079%, which is 1 in 1,417,418,550 bets.

Now, maybe the pessimists out there wills say, "yeah, I expect that, just my luck. First bet I have, and wouldn't you know it, a 1,417,418,550/1 shot will get up by me having a run of outs of 200." Well, we'll just rename you Neil from the Young Ones.

From my point of view, I don't think that's a reasonable run of outs to expect, therefore reasonable is somewhere in between.

How about 125? - Maths is 0.9^125, or 0.00019068374812%, or 1 in 524,428.

110? - 0.9^110, or 0.00092613871310%, or 1 in 107,975. This means you could expect one of these runs in your 100,000 bet run.

Maybe it's 110. Maybe you have to find the figure whose likelihood matches your anticipated run of bets. In this case, that would mean betting 1/440th of the bank, so that in the event of that run, only 25% was knocked out. Of course, 1/440th of $1000 is only about $2.20, so you'd want to have a big bank.

I don't know, this is why I posed the question in the first place - to try and find the way of working out what is a SAFE level but not a DEAD level at which to punt, given a method's strike rate. Perhaps I just answered my own question?

Must run now, my Grade 3 class starts shortly, teacher said we're learning about the Magic Faraway Tree today.