Just-Dice.com : Invest in 1% House Edge Dice Game

bets = []
outcome = []
nSessions = 20000

for i = 1:length(celeste)
bets = cat(1,bets, repmat(celeste(i,3),celeste(i,1),1));
outcome = cat(1,outcome, repmat(celeste(i,4),celeste(i,1),1));

end

shuffledResult = sign(rand(length(outcome),nSessions)-.505);
shuffeldOutcome = repmat(abs(outcome),1,nSessions).*shuffledResult;

figure(1);clf;hold on
hist(sum(shuffeldOutcome,1),100)
plot([sum(outcome) sum(outcome)],[0 650],'r--')

title('Outcome probability of celeste betting')
ylabel('# of outcomes')
xlabel('celeste''s total profit (BTC)')

probProfit = 1-sum(sum(shuffeldOutcome,1)<sum(outcome))/20000;
text(2000,680,['p = ' num2str(probProfit)],'color','r')
print(gcf,'-depsc','Celeste')

I agree, as long as we keep the tinfoil hats off (celeste has a special edge/cheat), then this is normal variance due to an abnormally large bankroll. However, it is normal variance which can scare off investors and if celeste does stop playing or continue staying lucky, can dig J-D investors in a hole too deep to earn our way out from in a sane amount of time. I just know that something needs to be changed - we do not need to have so much larger a max profit per bet than our competitors. We not even in the same universe with them - they are 3 to 5 BTC and we are 270 BTC?

Apparently dooglus derived 1% of the bankroll as the maximum bet by trial and error but as it turns out it's been mathematically proved that this is the most efficient maximum bet to optimally grow the bankroll. The proof is called the Kelly Criterion and investors have known about it for years:

http://www.investopedia.com/articles/trading/04/091504.asp

Kelly % = W – [(1 – W) / R]

Where:
W = Winning probability
R = Win/loss ratio

W = 0.505 (bank's edge)
R = 1:1 (profit and loss are both equal for a 2x bet)

Kelly % = 0.505 - [(1 - 0.505) / 1]

= 0.505 - 0.495 = 0.01, or 1% of the bankroll.

Note that a full Kelly Criterion doesn't try to minimize volatility; rather it maximizes growth in the long term.

If you are a short-term investor J-D may not be the right investment for you.

You might be right - my expectations were for up days and down days but not this level of volatility. What I wonder though is our bankroll large enough to support the Kelly Criteria or can we be bankrupt (or lose enough investors flee) before the Kelly Criteria can assert itself.

It's asserting itself right now... Site is back to flat. For the moment.