Life Lessons from Roulette

Table of Contents
Gambling Methodology ........................................................................................................ Constant Bet ...................................................................................................................... Martingale .......................................................................................................................... Martingale with Limit .......................................................................................................... Conclusion ......................................................................................................................... 1 2 3 4 6

I am embarrased to admit it, but I lost pretty much all of my dogecoins betting on roulette. I know enough about statistics to know that it is impossible for me to win in the long run, but I thought that I could break even or get lucky in the short run and come out ahead. It all started with a balance of 6000 dogecoins that I used to gamble on http://dogespin.l8.lv. I turned this balance into 19000 dogecoins, but I did not stop. I kept gambling and lost it all. Upset with my loss, I traded 70000 reddcoins for dogecoins that night and gambled those away too. While mining another 1000 dogecoins, I read about the Martingale strategy for Roulette. I decided to give it a try and I ended up winning 10000 dogecoins. At this point, I thought the strategy was a sure thing and kept doubling my losing bets until I eventually couldn't. I then decided to bet everything and lost it all. I got so desperate that I took the 300 dogecoins that I had left over in my mining account and gambled with that as well. I modified the Martingale strategy to cap the maximum bet at 10% of my balance. This seemed to be very slow and the balance barely moved, but I eventually lost everything again. I worry that I will try to gamble again if I am given the chance. Even though I know that the statistics are against me, I need to see the results for myself. I will simulate the three systems with infinite balances and prove to myself that gambling does not pay.

Gambling Methodology
We will use the following rules for each scenario: 1. We will represent the beginning balance as zero. Since we are simulating an infinite balance, this will make the net income obvious. 2. We will always begin the bets at one. 3. We will place ten million bets. 4. We will use a roulette table with one zero slot and 1-36 slots. 5. We will always bid on the first twelve. This will pay 3:1 and the house will have an edge of 2.70%. 6. We will use the same set of random numbers for each scenario. These rules will be encompassed here: % minimum bid MIN_BID = 1; % total bids NUM_BIDS = 10e6;

Life Lessons from Roulette

% reset random number generator rng('default'); % simulate all the roulette spins spins = randi([0 36], NUM_BIDS, 1); % vector will contain 1 for each win and 0 for each loss wins = 0 < spins & spins < 13; % calculate returns from winning(+2) or losing(-1) returns = wins * 3 - 1; % visual way to verify even distribution hist(spins, unique(spins)); title('Roulette Spin Distribution'); xlabel('Spin Results') ylabel('Total Spins')

Constant Bet
This is the simplest possible strategy. We will bid the minimum amount each time. % we bid 1 each time constBids = ones(NUM_BIDS, 1) * MIN_BID;

Life Lessons from Roulette

% multiply bid by return from roulette and plot constTotals = cumsum(constBids .* returns); plot(1:NUM_BIDS, constTotals); title('Results from Constant Betting Strategy'); xlabel('Spin Number') ylabel('Net Balance')

The linear downward movement from this strategy makes sense given the house edge. The fact that the balance is around -0.27 million corresponds to the house edge of 2.7%

Martingale
See http://en.wikipedia.org/wiki/Martingale_(betting_system) The strategy is to double your bet if you lose and reset to the minimum bid when you win. % keeps track of last bid for doubling purposes martingaleCurrBid = MIN_BID; % calculate bids for each spin martingaleBids = zeros(NUM_BIDS, 1); for i=1:length(returns) % record bid martingaleBids(i) = martingaleCurrBid; % if we win, reset the current bid

Life Lessons from Roulette

if returns(i) > 0 martingaleCurrBid = MIN_BID; else martingaleCurrBid = martingaleCurrBid * 2; end end % multiply bid by return from roulette and plot martingaleTotals = cumsum(martingaleBids .* returns); plot(1:NUM_BIDS, martingaleTotals); title('Results from Martingale Betting Strategy'); xlabel('Spin Number') ylabel('Net Balance')

The balance may be much greater than it started in this example, but notice that the balance stayed pretty flat until the end. At the end, there were many losses in a row leading up to the point in which there was a win that caused the losses to be turned into a gain. The gambler would have to have almost ten trillion in this case to cover it.

Martingale with Limit

This is the same strategy as the Martingale except you reset your bid if it goes past the limit. If the limit is 8, for example, and you kept losing, you would place the following bets: 1, 2, 4, 8, 1, ... In my example above, I limited this to 10% of my balance. Since we have an infinite balance, I will arbitrarily limit this to .

Life Lessons from Roulette

% maximum bid before resetting BID_LIMIT = 2^10; % keeps track of last bid for doubling purposes limitCurrBid = MIN_BID; % calculate bids for each spin limitBids = zeros(NUM_BIDS, 1); for i=1:length(returns) % record bid limitBids(i) = limitCurrBid; % if we win or bid is over the limit, reset the current bid if returns(i) > 0 || limitCurrBid * 2 > BID_LIMIT limitCurrBid = MIN_BID; else limitCurrBid = limitCurrBid * 2; end end % multiply bid by return from roulette and plot limitTotals = cumsum(limitBids .* returns); plot(1:NUM_BIDS, limitTotals); title('Results from Martingale with Limit Betting Strategy'); xlabel('Spin Number') ylabel('Net Balance')

Life Lessons from Roulette

Almost as linear as the constant bet strategy, but with more than a magnitude greater losses. This would still be a better strategy than the limitless Martingale strategy if the user did not have a infinite balance.

Conclusion
All three strategies result in major losses over time. The constant bet and Martingale with limit strategies have very predictable losses. The limitless Martingale could result in gains if you have a large enough initial balance. However, if the gambler hits a losing streak and cannot keep up with the escalating bids, this will result in major losses. I am now convinced that everything I won in the past has all been luck. No more gambling for me. "The House Always Wins" Published with MATLAB R2013b