Link[terraria.wiki.gg]
Luck is a new hidded stat that affect drop rates and spawns. Unfortunately the only way to keep track of it is the Wizard.

This fact blew up hard. People are not happy, and then someone asked the Devs about it who gave a bad/funny answer which was obviously spread everywhere and just made everything worse.

So I'm here to try to clear some things up about Luck.

But overall, try to see this as a way to gain the system rather than a penalty. We know the facts, we can use it to our advantage now.

Note: So far I have no way to confirm this or anything like that since it is a hidden stat and therefore hard to keep track on. This is all based on the wiki.



NOTE: 2020 02 50: From 1.4.3 onwards, the Negative aspect of Torch Luck was removed. Link[terraria.gamepedia.com]

This makes the Luck system basically pointless now unfortunately as the only way to decrease your Luck now is to Kill Ladybugs or NPCs, therefore maxing out your Luck should be easy to do and getting negative is almost impossible.

Let's start in the right end: Why should you care?
When an enemy is killed or an object is broken and that entity has a loot table, chances are calculated with a randomizer to see what you get.
Same with enemy spawn, time passes, something is supposed to spawn. Where and what is determined by chance.

And these things, the chance based things, is what Luck affects. Not the chance directly. But by adding a chance before the actual "roll" to either double or halve that "roll".

What does it affect?
In most cases, the player performing the roll influences the luck

• All material drop rates from enemies
  
• All unique item drop rates from bosses (with some exceptions).
  
• Players with high luck have better coin drop rates and chance of Coin Portals from Pots
  
• Chances of enemies dropping Hearts and Mana Stars. And dropping more than 1.
  
• Chances of Food dropping from enemies and trees.
  
• Chances of items appearing in the Travelling Merchant and Skeleton Merchant inventory. (Based on the player with highest luck.)
  
• Chances of spawning special enemies and critters.
  
• Chances of a Hardmode Dungeon enemy spawning outside their wall type
  
• Chances of the NPCs spawning underground (the ones you need to find).
  
• Chances of Fairies spawning underground.
  
• Damage calculations, positive luck generates 2 random numbers and pick the highest. Negative the opposite

Luck is a hidden stat with a value between -1 and 1. This is also translated to a chance for things to be doubled or halved. Having a positive score of 1 means 100%, having a positive score of 0.2 = 20%, 0.6= 60% etc.

How to increase it:
These points are explained further down.

The total you can get is 1, that's 100%. So there are different ways to go about it based on the list above. But there are also effects that can decrease it.

How to decrease it:

• Bad Ladybug Luck - Killing Ladybugs -0.2 (critters) effect lasts 3min
  
• Having the wrong Torch nearby, up to -0.3 (more on that later)

Halfshell Cat: Killing guide also gives Ladybug Luck, killing other NPCs give Bad Ladybug Luck


How does it work?
First of all, Luck is calculated from all the sources:
Ladybugs + Torch Score + Lucky Potions + Lantern Night + Garden Gnome = Luck Stat

If the player's luck is greater than 0, then there is a (100 * luck)% chance that the chance is doubled.
If the player's luck is less than 0, then there is a (-100 * luck)% chance that the chance is halved.
If the player's luck is 0, the chance will be the base value.
Meaning:
Before any of the "rolls" for the chance (in the previously mentioned affected things happen). You have a chance to double or halve that chance.

Example:
A Hook has a 4% chance to drop from Skeletons.

If your luck is above 0 it gives you that many percent of the chance being doubled.
So if your current luck value is 0.2 you get a 20% chance to double the 4% drop rate to 8%.
in 80% of the times, the drop rate is still 4%.

If your luck is below 0 it gives you that many percent of the chance being halved.
If you luck is -0.2 if gives you a 20% risk to halve the 4% chance to 2%.
In 80% of the times, the drop rate is still 4%.

https://terraria.gamepedia.com/Luck#Torch_Luck


The Big Torch Debate
The strangest thing to affect Luck is the type of torches placed near you (42 tiles) depending on the biome you are in.
(it's the same range as a Water Candle/Peace Candle. So a bit larger than what you can see on your screen).
More than one of the same type of Torch does not affect the score.

Note. From 1.4.3 onwards, if the resulting value is negative it is ignored. Therefore, Bad Torch Luck will only cancel out Good Torch Luck but will not decrease your total luck.
Link[terraria.gamepedia.com]

Note. From 1.4.4 (?) onwards a "Torch God" Event will start if there are 100 wrong torches in an area. The screen will go black and each torch will fire a projectile against your character. Survive and the event ends and you receive the Torch God's Blessing item.
This adds a choice to the top left of your screen to make every biome torch(and campfire) you place become the prefered one. So now you can get Jungle Torches whenever you place normal torches in the jungle.

Placed Torches on the Surface and in Space are ignored. This means that in these layers, only held Torches will affect luck.
Torch luck does not apply in the Dungeon or Jungle Temple.
In the Underground and below, each type of Torch present in a 40×40-tile rectangle centered on the player (and also any Torch they are holding) will increase or reduce Torch luck

This system adds a new layer of complexity
Torches give positive and negative "scores" depending on where you use them. These are two different values Positive Score and Negative Score.
The total scores in turn gives you + or - to your luck stat in the end.

• If P score is equal to or greater than 1: +0.2 Luck
  
• If P score is between 0 and 1: +0.1 Luck
  
• If N score is between 0 and 1: -0.1 Luck
  
• If N Score is equal to or greater than 1 but less than 2 :, -0.2 Luck
  
• If N Score is equal to or greater than 2: -0.3 Luck

Then the total of those two are added together.
Note. From 1.4.3 onwards, if the resulting value is negative it is ignored. Therefore, Bad Torch Luck will only cancel out Good Torch Luck but will not decrease your total luck.

So if you use the right Torch 1+ P Score, and a bad Torch 1+ N Score your total luck is 0.2 - 0.2 = +0 Luck
If you only use the right Torch 1+ P Score, your total luck is 0.2 +0 = +0.2 Luck

The Torches and their Scores (directly taken from the wiki)

* - Coral torches give 1 N Score unless placed in water.
** - Torches Give 0.5 N Score in Desert, Corruption, Crimson and Hallow. But 2 N Score in Snow.

***All other torches give no positive nor negative scores such as Ultrabright Torches and the gem torches.

In most cases, the torch thing is straight forward. Use the torch from the same biome for a positive buff but nowhere else.
Ice Torch gives bonus in Snow Biome but penalty everywhere else. Craft Ice Torches by combining 3 Torches with any Ice Block. The materials needed for the biome torches are gained from that biome alone.

But here comes a list of all the Torches that doesn't have a Negative Score:

• Purple Torch
  
• Yellow Torch
  
• Blue Torch
  
• Green Torch
  
• Red Torch
  
• Orange Torch
  
• White Torch
  
• Pink Torch
  
• Bone Torch
  
• Demon Torch
  
• Rainbow Torch
  
• Ultrabright Torch
  
• Cursed Torch
  
• Ichor Torch

• Gem torches are mady by combining any gem with 10 torches. You can now also combine 1 gem with an acorn to make a Gem Tree that grows and drops gems.
  
• Bone Torches are sold by the Skeleton Merchant
  
• Demon Torches are found in the Underworld
  
• Rainbow Torches are crafted with 10 torches and a Rainbow Brick (which drops from Rainbow Slimes in Hallow).
  
• Ultrabright Torches are sold by the Travelling Merchant
  
• Cursed Torch are made from 33 Torches and 1 Cursed Flame, dropping in underground Corruption in hardmode
  
• Ichor Torchare made from 33 Torches and 1 Ichor, dropping in underground Crimson in hardmode

The Lucky Buff gives + Luck depending on the time remaining on the buff. Therefore the 3 different potions give the same Lucky Buff but have different durations.
Lesser Luck Potion lasts 3min
Bottled water, Water Leaf, Ladybug, White Pearl
Luck Potion lasts 5 min
Bottled water, Water Leaf, Ladybug, Black Pearl
Greater Luck Potion lasts 10min
Bottled water, Water Leaf, Ladybug, Pink Pearl

They are all crafted at a Table with Bottles or Alchemy Stations

• Bottled Water: Craft with a Bottle while near water
  
• Waterleaf: Found in Deserts
  
• Ladybug: Critters spawning in Forest biome during Windy Day events.
  
• White/Black/Pink Pearls:From Oysters, fishing reward from Oasis

Lucky
The Luck bonus is based on the remaining minutes of the buff:

• If minutes left is 5 or greater: +0.3 Luck
  
• If minutes left is 3 or greater: +0.2 Luck
  
• if minutes left is less than 3: +0.1 Luck

+0.2 Luck
Garden Gnome is a placeable furniture. However, to get one you need to lure a Gnome enemy into sunlight where it will become petrified; true to the folklore.

Gnomes (the enemy) is a random rare spawn on the Surface (where there is background so below ground), making them petrified counts as kills. They tend to spawn more often near Living Trees. Since it's a rare creature the Lifeform Analyzer will detect it and luck will increase the chance of it spawning.

The Ladybug grants the player "Ladybug Luck" or "Bad Ladybug Luck".

• Touching one gives +0.2 Luck for 12 min
  
• Touching a Gold Ladybug gives +0.2 Luck for 24 min
  
• Killing one or using as bait gives -0.2 Luck for 3min

These states cancel each other out and replaces each other.

Ladybugs spawn during Windy Day weather in the Forest Biome. Increase spawn rate with Water Candles and Battle Potions.
You can capture them and release them, touch them and then capture them again.
Use the Zoologist Critter protection book to avoid killing them.

+0.3 Luck
A random weather effect that can take place when no other weather or events are taking place.
It also occurs after defeating a boss or completing an invasion event the following day.
No idea about the chance of it showing up but easy to see as the background fills up with what resembles Chinese Lanterns, or if you will - the lanterns from Tangled.

Other Luck affecting stuff:
Halfshell Cat: Killing guide also gives Ladybug Luck, killing other NPCs give Bad Ladybug Luck

Simplest way to explain the new Coin Luck system is this:

Throwing one Platinum Coin into shimmer will provide +0.2 Luck bonus for about 3 minutes and 50 seconds, decreasing in effectiveness every second until it runs out or you refresh it.

Now for the actual explanation:

• Tossing coins into the shimmer makes them dissappear and a "Coin Luck Counter" Variable is increased in value.
  
• Different coins give different values to the counter.
  
• The value of the counter gives you a Luck bonus ranging from +0.05 to +0.2.
  
• The value of the counter variable decreases by 0.01% per tick, which occurs 60 times in one second.
  
• This buff also affects all players within a radius of 62.5 tiles centered on the consumed coins' location.

So, if you have a Shimmer Bucket and you are farming a particular item you can toss in a Platinum coin to increase your Luck stat for a while to increase your chances a bit more!

The following accessories now grant a +0.05 Luck when equipped (To a max of +0.1):

• Amber Horseshoe Balloon
  
• Blue Horseshoe Balloon
  
• Bundle of Horseshoe Balloons
  
• Coin Ring
  
• Greedy Ring
  
• Green Horseshoe Balloon
  
• Lucky Coin
  
• Lucky Horseshoe
  
• Obsidian Horseshoe
  
• Pink Horseshoe Balloon
  
• Yellow Horseshoe Balloon
  
• White Horseshoe Balloon

If you toss a Pink Pearl into the Shimmer you gain a Galaxy pearl, this one-time item gives a permanent +0.03 Luck

Not gonna paste it all in. But talking to the Wizard NPC (in hardmode) is currently the only known way to know your luck.



https://terraria.gamepedia.com/Luck#Wizard_Luck_status

Halfshell cat 2020 05 20
Too many topics about luck so hopefully this will help.

Luck gives a hit to damage and drop rate from placing the wrong torches.

Avoid it using:

• Colored torches made from gems
  
• Ultrabrights or bone torches sold by special merchants
  
• Cursed/ ichor torches
  
• Other "special" neutral torches like Rainbow torches

If you want a bonus then you can place the correct torch in the correct biome. This is helpful if fighting a boss you have trouble with.

Early on you want to look for amethyst or topaz to make torches from. You can even make them on the spot. Once you have 100 gem torches you can safely ignore this mechanic for the rest of the game as long as you occasionally dig up gems.

I'd appreciate it if others helped spread this knowledge so that people can just have fun playing until someone fixes it. Even if the devs don't we can likely expect mods to alter it. Its not the end of the world guys, its just a little crafting.

Also kill the guide, touch a ladybug, place a garden gnome nearby or drinking a luck potion will all offset most torch luck penalties. So if you really want to use regular torches then just set up the guide to die whenever he spawns and his luck boost will last for 12 min.

For example, a Hook has a drop rate of 4% on killing an Skeleton but .

If you kill that enemy 1000 times you would expect 40 Hooks to drop.
(Very simplified, this is what is called a "statistical average". It is possible but unlikely that you end up with 10 or 200 as well)

If your luck is 0.7 after all the buffs there is a 70% that the 4% drop chance is doubled to 8% when you kill a Skeleton.
This results in a situation where our chances are sometimes increased which gives us a new Statistical Average

But it's too late and my head hurts from writing the guide. So I will add actual calculations later.

About the damage
So everytime you deal damage to an enemy the damage is set to a value between 0.85-1.15 of the final number. (But before enemy defense is taken into account)

So reaching 15dmg after all buffs and calculations and such gives the true damage somewhere between 12.75 and 17.25.

200 damage may become anything between 170 and 230

Note.This has always been the case in the game.

But with negative luck there is a chance that the roll is made twice and the lowest one is chosen.
With positive luck there is a chance that the roll is made twice but the highest is chosen.
This chance is based on good/bad your luck bonus currently is.