Bankroll Management – Don’t Go Broke

“The next best thing to gambling and winning is gambling and losing.” — Nick “The Greek” Dandalos

There is one rule by which I live — don’t go broke. Going broke means losing the freedom to work when, where, and how hard I want. Those perks outweigh having a ton of money. I could probably make more working for a trading firm, but who wants to work for someone else? My indirect goal is to earn but my primary goal is to keep myself in the lifestyle I’ve grown accustomed to. I won’t avoid risk, but managing it is a tough skill. In this article, we’ll look at strategies to avoid going broke while making enough money to live.

Being +ev (positive expected value) in a game is not good enough — you must be +ev enough to make a living, otherwise you rate to go broke. In online games, you can compile reliable data as to your win rate, and extrapolate your annual earn, providing you with some measure of surety. Even there, you’re using past data, not a reliable indicator of future events — bad players might go broke, good players might move down (or up) to your stakes, you might not adjust, and there’s always some chance you were just running good.

Bankroll

Beyond being good enough to make a comfortable living, you need enough money to weather a bad run. Be pessimistic — however bad you’ve run in the past, mathematically, you are likely to run worse in the future. If you’re not adequately bankrolled and suffer an extended period of negative variance, you might need to move down in stakes, to where you can no longer make enough money to sustain your lifestyle.

How much is enough? Over my last 200,000 hands online, I’ve won at a rate of six big blinds per 100 hands — a pretty healthy win rate. However, that’s with a standard deviation of 155 big blinds. Plugging that data into a variance simulator, there is a 5 percent chance I was just running above expectation and in fact rate to lose 0.2 big blinds per 100!

My guess is that I did run good, but I’m worth about five big blinds per 100 in the games I play; that means there’s roughly a 2 percent chance I go broke if I don’t move down after a bad run. That’s a 2 percent chance of losing the lifestyle I love and going back to a desk job — too high for my liking!

Budget

If you’re not a winning player, you’re practising “budget management”. Even if you rate to win a small amount, but spend equal to or more than your expectation, you become a losing player — if your bankroll is not growing, it’s getting smaller. That’s ok, as long as you’re realistic. For most, poker provides entertainment, giving you the chance to prove yourself better than your peers, and tugs you along the tightrope of emotion that comes with winning and losing. So make it last — don’t spend your winnings as soon as you earn them, or move up quickly; certainly, don’t move up just to chase losses. The games are likely tougher and higher variance, so even if you rate to win (how can you be sure?) the most likely outcome is that you lose a good chunk. If you do win, when will you stop? When you have all the money? When you have none? Do you have the discipline to stop playing? Few do.

Moving Up or Down in Stakes

If you’re playing more than one table online, it doesn’t make sense to restrict yourself to one stake. Just because you’re comfortably rolled for $2-$4, doesn’t mean you shouldn’t play $1-$2 or even $0.50-$1 — those will likely be easier games. My personal preference is to have at least 80 buy-ins for my “regular” level — currently $3-$6, and play the next two levels down, and I’d recommend you do the same. When it comes time to move up, you could start taking shots when you have 60 buy-ins, but keep a strict stop-loss for the higher stakes — five buy-ins is plenty.

If you have a bad run, move down before you need to. Part of the reason for your bad run might be that the higher stakes games are more aggressive with higher variance, populated by tough players. Rebuild your confidence by playing in more passive, lower variance games at lower stakes. That way, if your bad run continues, your losses will be smaller and won’t affect you as much psychologically.

Buy-Ins

Online, you can buy in for varying amounts from 20 big blinds to 300, depending on the site. Many people legitimately dislike short-stackers, but it can be more profitable to buy in short, depending on your level of experience. Nonetheless, the best way to learn the game is to buy in for at least 100 big blinds. If you have the option, consider (depending on the stacks and players surrounding you) buying in deeper, and exposing yourself to tough, deep-stacked decisions to accelerate your learning curve.

Live, pot-limit games are usually uncapped, so you can buy in for as much as you want, though the minimum varies from 10 big blinds to 100. I almost always buy in for the minimum or near to start with, and assess the situation after 15 minutes — Who’s playing? Where are they in relation to me? Am I playing well? If I’m not feeling great, I probably won’t top up, but if I’m feeling good, and the right people are at the game, I might top up to 1,000 big blinds.

There are two rules to help you with buy in sizes. If the stacks to your left are shallow, and those to your right are deep, you should buy in to cover those deep stacks, resulting in having lots of play when you’re in position. If the deep stacks at the table are the strong players, and the short-stacks weak, you should buy in short — buying in deep would mean having excess money only coming in to play against the tough players.

Your buy-in size is also a function of your bankroll. With a £2,000 bankroll, you only have 10 shots with a £200 buy-in size in a £1-£2 game; if you buy in for £50, you now have 40 shots. Assuming everyone at the table is buying in for different amounts, you can effectively choose the stakes you’re playing when you sit down. Remember though that if you build up a big stack, you’re risking money won, and it might constitute a decent chunk of your bankroll. Consider protecting the win and getting up from the table if losing what you have in front of you would affect you significantly, either psychologically or financially.

The name of the game is winning money, but you can’t win anything if you have nothing to risk. In order to maintain your lifestyle, or a fun hobby, be conservative with your money management. Don’t risk too much, and don’t spend all your winnings once they hit your bank account.

Michael Piper has been playing pot-limit omaha online for a living for more than three years. He coaches at cardrunners.com and posts online under the screenname wazz.