V8 Predicts

Risk of ruin

Risk of ruin is the probability of losing a bankroll entirely before any long-run edge can be realised.

In plain English

It depends on stake size relative to bankroll far more than on the quality of selections. A profitable approach staked too aggressively can still go broke, which is why survival is a separate problem from being right.

Example

Risking a quarter of a bankroll per bet makes ruin likely within a handful of losses, whatever the edge.

Why it matters

Being right is worthless if you are not still betting when it pays off.

Related terms