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Originally Posted by TakenItEasy
Kelly Criterion shows the allowable risk to obtain the maximum growth rate without risk of ruin.
Under the assumption of continuous wagering amounts (ie, infinitesimally small). In real life, a kelly bettor can go broke. Incidentally, since kelly makes you decrease your bet as BR shrinks, its side effect is that you have a low risk of ruin. I say "side effect" because the point of kelly is to maximize exponential growth, not to minimize risk of ruin. To minimize risk of ruin you'd just always play the lowest stakes.
With continuous wagers allowed, Kelly wouldn't be the only way to achieve 0 risk of ruin. Any fractional wagering strategy would. But a different fraction would result in slower growth, and a fraction >= 2x kelly would guarantee that you end up stuck in the infinitesimals forever.
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It establishes theoretical limits of bet/bankroll ratios allowed for +EV wagers, that may be as high as 20% of your bankroll.
They can be as high as 99.999999% of your bankroll. Not in poker or blackjack but yeah I know what you mean, it can appear "aggressive" even though it's quite safe.
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Again, I would caution that applying it directly to poker wouldn't always work since...
Yeah but even if you could, it wouldn't matter. Someone flipping a biased coin and winning 60% of his flips, and using the kelly criterion, faces a risk of ruin.
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However, you can simply force all betting to be within your limits by never playing with a stack that's outside of your theoretical comfort zone in cash games.
What if your BR is down to $5? Now you're under-rolled even at 2nl and Kelly would be telling you to play lower stakes but you couldn't. So you'd just have to "take a shot" at 2nl and hope not to get wiped out by some 2nl donk chasing a gutterball.
It's never gonna happen to anyone, but my point is that the probability is greater than 0. I take back my "non-negligible chance" remark since you get to start with thousands and play as low as 2nl if necessary, and your edge is greater at each lower stake. It would only be a non-negligible chance if you never moved down in stakes (but even then, if you also didn't move
up in stakes, it would be a low chance).
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I'm sure this is true at some point because for each buy-in you pad your roll, the odds against busting moves in the opposite direction at an even faster rate. Another words, as your hands played and your bank roll approach infinity the number of hands required to bust you grows at an even faster rate so it seems like one infinity would be dominating over the other preventing your going bust.
Your risk of ruin decreases as bankroll increases, and approaches zero as BR tends to infinity. But as long as your BR is less than infinity, your risk of ruin is greater than 0. Doesn't matter if you're flat-betting or discrete kelly-betting. You don't get to use the fact that you
expect to have more money in the future, to say that your current risk of ruin is zero.
Edit: just saw your last post Taken. I suppose I already addressed it though.
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but the original question of all players must face doom is not correct.
Yeah that part was refuted a while ago itt.
Last edited by heehaww; 07-29-2014 at 10:42 PM.
