Risk of Ruin - Bankroll Management

atomicstorm

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As I intend to share some aspects of my data collection in my Improved Mako FAL journey, I wanted to spin up a conversation that it seems that most people cannot comphrend on PCF.. and that is bankroll management.

One aspect of bankroll management is how you use it in day to day operations. There is a mathematic concept called Risk of Ruin. ROR is not a gambling concept, although typically used in gambling computations. It is a measure of risk in any activity stemming from probability. It is defined as:

Risk of ruin is a concept in gambling, insurance, and finance relating to the likelihood of losing all one's capital or impacting one's bankroll to the point that it cannot be recovered. For instance, if someone bets all their money on a simple coin toss, the risk of ruin is 50%.
Source: http://en.wikipedia.org/wiki/Risk_of_ruin

So why is this important?

The more seasoned players constantly lecture the new and/or stubborn players on PCF about hunting at their level. This is multi-faceted. Not only should one hunt at their level but should also hunt relative to their bankroll so that the bankroll can recover as the law of large numbers converges to the set mean (the set mean being the TT return of your setup).

The Math

Perhaps it is easy for me to understand these concepts having been a card counter for 4 years. It's actually quite funny that I really did go to casinos every week (and paid off credit card debt as a result) with a $3000 bankroll but I can't get myself to hunt bigger than 80 cent mobs now when I was dropping from $5 to $100 (and sometimes a $1000 here and there). That's a mental barrier I have to work on once my sword is maxed. But for now, I will share with you the math so that you can tailor the risk factor to your own behaviors.

You can search online to find out what the Risk of Ruin formula is for most scenarios. However, being as that a "bet size" is not an all or nothing proposition in Entropia Universe, I have modified the formula.

The Variables

Current Bankroll, Lower Bound Risk, Daily Cycle (in PEDs), Lower Bound Result (in PEDs), and Risk of Ruin % are the variables used in the equation.

My Bankroll: 45,000 PEDs - This is the size of my ped card. Any profit after that mark is invested, withdrawn, or given away in land area prizes.

Lower Bound Risk: 80% - This is a short term average TT return % size for my setup. While most of my hunts are 90% are better now, I chose to play it safe. There is always the occasional 60%-70% but that is almost always because I am not killing enough for the cost to kill said mob (will refer to this as Hunt Rule #1). 500 kills I find to be a minimum. I am starting to learn that I shouldn't hunt unless I can kill 500 of whatever it is that I am after.

Daily Cycle: 4,000 PED - This is the average daily cycle (averaged over 7 days because I do 8-10k on the weekend).

Lower Bound Result: -800 PED - This is the amount that I will lose in my worst days (as long as hunt rule #1 is observed). I call this the worst case scenario. There is of course variations, but this is a pretty conservative value.

Risk of Ruin: 1.78% - Safe space is almost always < 2%. Acceptable risk is between 2.01% and 5% (although upper end means you believe reward is greater than the risk). Anything higher than that and you are playing above your level, bankroll, and just not being smart. This basically says that you need to have roughly 56.17 straight days of 80% returns to go broke.

The formula is simply: ABS(Lower Bound Result) / Current Bankroll. The modifier for this formula is the lower bound risk. If I wanted to be even more conservative and set it at 70%, then my ROR is 2.67%.

All these numbers are based on having very little to no markup to offset. So, let's look at the effect of average markup.

Same variables but we will add average markup:

Current Bankroll - 45,000 PED
Daily Cycle - 4,000 PED
Lower Bound Risk - 80%
Lower Bound Result: -800 PED
Average Markup - 0.025 (102.5%)
Markup Per Day - 100 PED
Lower Bound Result with Markup: -700 PED
Risk of Ruin with Markup - 1.56% (-0.22% difference)

Hope this gives you a bit of insight, should you find yourself in a perpetual deposit cycle. As it relates to ROR, your hunting behaviors (daily ped cycle) and setup (lower bound risk) are more important than markup. I used these numbers like 80% to play it conservative. If you believe in the 90% theory, you can raise it to 90%. If you are jaded and raging or shooting a very unmaxed weapon, you can drop it to 60%/70%. That factor changes with your own experience.

One last note, if you do not want to be all nerdy - some advice someone once told me is that your bankroll should consist of 3-4x the amount of TT you lose on average per month at a very minimum.
 

Aio

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Was going to ask you to post this. Thanks.
 

duncis

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Amen!
At least "Amen" to all the threads that starts with - i lost 500usd in a weekend and got nada to show for it!
Or in worst case scenario we can now refer to this thread!

Cheers
Soko
 

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As I intend to share some aspects of my data collection in my Improved Mako FAL journey, I wanted to spin up a conversation that it seems that most people cannot comphrend on PCF.. and that is bankroll management.

One aspect of bankroll management is how you use it in day to day operations. There is a mathematic concept called Risk of Ruin. ROR is not a gambling concept, although typically used in gambling computations. It is a measure of risk in any activity stemming from probability. It is defined as:


Source: http://en.wikipedia.org/wiki/Risk_of_ruin

So why is this important?

The more seasoned players constantly lecture the new and/or stubborn players on PCF about hunting at their level. This is multi-faceted. Not only should one hunt at their level but should also hunt relative to their bankroll so that the bankroll can recover as the law of large numbers converges to the set mean (the set mean being the TT return of your setup).

The Math

Perhaps it is easy for me to understand these concepts having been a card counter for 4 years. It's actually quite funny that I really did go to casinos every week (and paid off credit card debt as a result) with a $3000 bankroll but I can't get myself to hunt bigger than 80 cent mobs now when I was dropping from $5 to $100 (and sometimes a $1000 here and there). That's a mental barrier I have to work on once my sword is maxed. But for now, I will share with you the math so that you can tailor the risk factor to your own behaviors.

You can search online to find out what the Risk of Ruin formula is for most scenarios. However, being as that a "bet size" is not an all or nothing proposition in Entropia Universe, I have modified the formula.

The Variables

Current Bankroll, Lower Bound Risk, Daily Cycle (in PEDs), Lower Bound Result (in PEDs), and Risk of Ruin % are the variables used in the equation.

My Bankroll: 45,000 PEDs - This is the size of my ped card. Any profit after that mark is invested, withdrawn, or given away in land area prizes.

Lower Bound Risk: 80% - This is a short term average TT return % size for my setup. While most of my hunts are 90% are better now, I chose to play it safe. There is always the occasional 60%-70% but that is almost always because I am not killing enough for the cost to kill said mob (will refer to this as Hunt Rule #1). 500 kills I find to be a minimum. I am starting to learn that I shouldn't hunt unless I can kill 500 of whatever it is that I am after.

Daily Cycle: 4,000 PED - This is the average daily cycle (averaged over 7 days because I do 8-10k on the weekend).

Lower Bound Result: -800 PED - This is the amount that I will lose in my worst days (as long as hunt rule #1 is observed). I call this the worst case scenario. There is of course variations, but this is a pretty conservative value.

Risk of Ruin: 1.78% - Safe space is almost always < 2%. Acceptable risk is between 2.01% and 5% (although upper end means you believe reward is greater than the risk). Anything higher than that and you are playing above your level, bankroll, and just not being smart. This basically says that you need to have roughly 56.17 straight days of 80% returns to go broke.

The formula is simply: ABS(Lower Bound Result) / Current Bankroll. The modifier for this formula is the lower bound risk. If I wanted to be even more conservative and set it at 70%, then my ROR is 2.67%.

All these numbers are based on having very little to no markup to offset. So, let's look at the effect of average markup.

Same variables but we will add average markup:

Current Bankroll - 45,000 PED
Daily Cycle - 4,000 PED
Lower Bound Risk - 80%
Lower Bound Result: -800 PED
Average Markup - 0.025 (102.5%)
Markup Per Day - 100 PED
Lower Bound Result with Markup: -700 PED
Risk of Ruin with Markup - 1.56% (-0.22% difference)

Hope this gives you a bit of insight, should you find yourself in a perpetual deposit cycle. As it relates to ROR, your hunting behaviors (daily ped cycle) and setup (lower bound risk) are more important than markup. I used these numbers like 80% to play it conservative. If you believe in the 90% theory, you can raise it to 90%. If you are jaded and raging or shooting a very unmaxed weapon, you can drop it to 60%/70%. That factor changes with your own experience.

One last note, if you do not want to be all nerdy - some advice someone once told me is that your bankroll should consist of 3-4x the amount of TT you lose on average per month at a very minimum.

How about perception? Lootious?
 

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Sadly.. Some people will ignore this and even try to tell $5 he's wrong.

+ Rep for being a boss.
 

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Thanks for the post, this is very interesting and insightful :).
 

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Starkiller

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Must spread some love before handing some more reputation to 5$

Sad panda! Very good contribution to all :)
 

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long time to read such interesting thread
thanks for this atomic
 

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(the TT return of your setup).
i concur with all said with the exception of the one little tiny bit above.

i dont think gear has anything to do with returns. only cycle rate and volume of loot actions (kills), matter when you need to get past the low points or as some call bad runs.
 

Rocket192

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i concur with all said with the exception of the one little tiny bit above.

i dont think gear has anything to do with returns. only cycle rate and volume of loot actions (kills), matter when you need to get past the low points or as some call bad runs.
when he used "tt return of your setup" i think he was referring to the fact that someone with imk2 maxed will have a different low-point TT return than someone with 2.8-2.9dpp cycling the same amount of ped.

equipment and run size influence returns equally
 

atomicstorm

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i concur with all said with the exception of the one little tiny bit above.

i dont think gear has anything to do with returns. only cycle rate and volume of loot actions (kills), matter when you need to get past the low points or as some call bad runs.
It definitely does. Please review bond theory. You'll find that in the forums.
 

atomicstorm

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hmm..in poker we had this saying "please dont educate the fish ";)
In this game, semi intelligent fish is better than stupid fish because the stupid ones will just quit and this game needs more players. At least in this case, there is some hope.

This thread is mainly for people to point to instead of responding to the hundreds of cry threads. It's just wasted cycles. Let them read or gtfo.
 

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It definitely does. Please review bond theory. You'll find that in the forums.
gonna need a link cuz im not finding any bond speaking about any loot logic that you mention. nothing since 2012 from any kind of bond regarding loot properties. and we all know loot had several subtle changes made to it over the years so anything older then 2014-15 is in most likeliness obsolete information and should not be in any way taken as anything remotely regarded as fact.
 

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tell that to "helena and company" , gl with that tho :D #helenacrysince2006
 

atomicstorm

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gonna need a link cuz im not finding any bond speaking about any loot logic that you mention. nothing since 2012 from any kind of bond regarding loot properties. and we all know loot had several subtle changes made to it over the years so anything older then 2014-15 is in most likeliness obsolete information and should not be in any way taken as anything remotely regarded as fact.
Bond theory is still true today. It does not give you any real advantages, but does help you understand the composition of loot by multipliers.

You will find it here for the search impaired. You can play with what that thread means by the numbers and why short term hunts are bad here.
 
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tell that to "helena and company" , gl with that tho :D #helenacrysince2006
Put a banana on your mouth and eat it.



Thanks for the share man. But do you think that the average joe will really read this? Kind of a bit advanced for the average guy. Also in Eu, you can't really predict anything besides the experince from previous runs and data collected in your case.

Gl with the successful grinding :):)
 

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Great post atomicstorm!

You must spread some Reputation around before giving it to atomicstorm again.
 

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I am average Joe. My bankroll is repairing my dagger and amp. And I have a landarea. Thank you perceptius!
 

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I only want to lose $50 a month after markup.....ok then you need a bankroll $5000
I only want to lose $500 a month after markup....ok then you need a bankroll of $50000
I only want to lose £5000 a month after markup...ok then you need a bankroll of $500000

You also need a LA, and $100k of CLD's, and never ever ever mention losses (as ego is more important than money).

Got it, thank you for your advice.

Rick
 

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Put a banana on your mouth and eat it.



Thanks for the share man. But do you think that the average joe will really read this? Kind of a bit advanced for the average guy. Also in Eu, you can't really predict anything besides the experince from previous runs and data collected in your case.

Gl with the successful grinding :):)

Ur bot doesnt predict anything? Make it collect data at least!
 
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Aio

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I only want to lose $50 a month after markup.....ok then you need a bankroll $5000
I only want to lose $500 a month after markup....ok then you need a bankroll of $50000
I only want to lose £5000 a month after markup...ok then you need a bankroll of $500000

You also need a LA, and $100k of CLD's, and never ever ever mention losses (as ego is more important than money).

Got it, thank you for your advice.

Rick
I think 5$ was telling you how to minimise your losses in the hope of looting MU which would make it profitable. It's what I do, I haven't needed to deposit in months and I've got tons of items which I don't use, with MU, waiting to sell at the right time.

But as expected, advice always goes straight over people's heads. There are some in the community who will always try to help others out; then there are the unhelpables :)

Bond theory is still true today. It does not give you any real advantages, but does help you understand the composition of loot by multipliers.

You will find it here for the search impaired. You can play with what that thread means by the numbers and why short term hunts are bad here.
:ahh: that turned into a bit of a flame war from me didn't it :ahh:
 

atomicstorm

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Put a banana on your mouth and eat it.



Thanks for the share man. But do you think that the average joe will really read this? Kind of a bit advanced for the average guy. Also in Eu, you can't really predict anything besides the experince from previous runs and data collected in your case.

Gl with the successful grinding :):)
You can lead a horse to water....

Also, tell me more about this banana... how would you eat it ? :eek:
 
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atomicstorm

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I only want to lose $50 a month after markup.....ok then you need a bankroll $5000
I only want to lose $500 a month after markup....ok then you need a bankroll of $50000
I only want to lose £5000 a month after markup...ok then you need a bankroll of $500000

You also need a LA, and $100k of CLD's, and never ever ever mention losses (as ego is more important than money).

Got it, thank you for your advice.

Rick
Yea.. good job on being a cynic. Maybe time for you to play hello kitty adventures. The beauty of this thread is that we can reference it in response to comments like yours and stop wasting time on you.

Reading comprehension 1, RickEngland 0
 
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I told you people would disagrees despite this post's undeniable accuracy.

Some people would rather live in ignorance... with their tin foil hats.
 

atomicstorm

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I think 5$ was telling you how to minimise your losses in the hope of looting MU which would make it profitable. It's what I do, I haven't needed to deposit in months and I've got tons of items which I don't use, with MU, waiting to sell at the right time.

But as expected, advice always goes straight over people's heads. There are some in the community who will always try to help others out; then there are the unhelpables :)



:ahh: that turned into a bit of a flame war from me didn't it :ahh:
NAh no flame war. Just truth.

I am only sharing a mechanic of probability. It is to explain why it's not a good idea to deposit 100 dollars and go after dasps. It's to level set people's expectations and for the community to reference this thread when someone starts crying on the forums about how they did explosives or big mobs on a small budget and very quickly lost everything... tip.. their ror is over 75%.
 

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i think it all makes sense regarding bond theory, no short runs. Many actions and loots come in waves, be it rings in boxes, oils or other less common items and multipliers. So it makes sense that killing only 100 mobs you stand a big chance of missing the wave, ideally you want to hit the waves are much as possible, i'm not sure if mob populality makes waves more common or not

i like the idea of the RoR, would cover those bad days.. but from the day migration started i've struggled to loot well, so hurry up and end :D
 

atomicstorm

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i think it all makes sense regarding bond theory, no short runs. Many actions and loots come in waves, be it rings in boxes, oils or other less common items and multipliers. So it makes sense that killing only 100 mobs you stand a big chance of missing the wave, ideally you want to hit the waves are much as possible, i'm not sure if mob populality makes waves more common or not

i like the idea of the RoR, would cover those bad days.. but from the day migration started i've struggled to loot well, so hurry up and end :D
With large cycling in a mob, comes an increased variance. It's this variance that often requires a suitable bankroll.

If we didn't have variance, we wouldn't need a bankroll and there wouldn't be any markup either.
 
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