Discipline: Part XI - Bankroll

I am nearing the end of this series of columns on discipline. Without strong self-discipline as a professional poker player (or in any profession that involves dealing with risking your capital in situations where is outcome is uncertain, like trading options). You will fail. So far, I have discussed avoiding tilt, finding good situations, physical conditioning, and mental conditioning.

In the last column I started examining the topic of building and maintaining a bankroll. Steve Zee’s first rule is: The Larger Your Bankroll Is, The Less Risk You Should Take! To make this relatively simply to apply, I divided bankrolls into three sizes: small, medium, and large. A small bankroll is an amount you could easily accumulate in a month or less from a job or your investments. A medium bankroll is one that would take you more than a month, but less than a year to accumulate. On average, it might take about six or seven months to accumulate. A large bankroll takes at least a year to accumulate. If you are a professional player, with no outside sources of income, treat your bankroll as large, unless you are willing to go back to work. Losing a big one is disastrous. Many players who have had a huge tournament win or a great run in cash games have found themselves with bankrolls larger than the savings of ordinary people who have worked their entire lives. Some of them go broke and never come close to having so much money again. Also, remember this amount is the amount that goes toward your gambling bankroll, so it is after expenses.

Steve Zee’s second rule is: Always Know How Much Can Risk

This is an essential principle of money management. People always ask: “How much do I need to play in a certain stake game?” The usual answer to all poker questions is,” It depends.” But in this case, it is the wrong question. The question really should be, “Given my temperament and current financial situation, how much I can I risk in a game?”
It is important to understand why temperament is a factor in knowing how much you can risk. Money management is not a ‘one size fits all,’ kind of thing. Years ago, Mike Caro distinguished between two types of players – plodders and adventurers. I will divide poker players into three categories. The plodders are extremely risk averse. They would rather play for pennies than take a chance of going broke. The normal players are willing to take moderate risk, if they think they have a reasonable advantage. Lastly, there are the plungers. They love to take extreme risks. There are the poker equivalents of mountaineers who want to reach the top of Mount Everest.

How can you tell which you are? You have an opportunity to bet on one coin flip (or any even-money event). You are getting 3 to 1 odds. This is about as good a gamble as you will ever get. If you win, you will triple your money, but if you lose, it’s gone. On average, you will end up with double the amount of your wager. When you win, you end up the one unit you bet plus the three that you win, which equals four, but the other half the time you end up with zero, which averages out to two. You can bet any percentage of your bankroll. How big a percentage would you risk?

Don’t treat this question as some obscure psychological test. Imagine there is a really good no-limit poker game for a much higher stake than you normally play. How much of your hard-earned bankroll are you willing to risk? I would hope that the absolute maximum anyone would consider is around one-third of the their bankroll. Even a true plunger with a small bankroll should consider that as the most they are willing to lose. Below is a table of what I think are the appropriate maximum percentages of your bankroll to risk. The left column is your bankroll size and the top row is your psychological profile:

Plunger Normal Plodder
Small 30% 15% 10%
Medium 20% 10% 5%
Large 10% 5% 3%

If there isn’t a really good game, lower the percentage you are willing to risk. If there is an incredibly great spot, perhaps allow yourself to risk a little larger percentage, but don’t go crazy. Make sure to calculate the maximum you can risk before you get to the casino. Know how much you should risk, and if the worst happens, quit for the day. If you insist on continuing, recalculate your loss limit based on your new, diminished bankroll. I will continue this discussion in the next column, but for now, remember:

Steve Zee’s Bankroll Rules:

1. The Larger Your Bankroll Is, The Less Risk You Should Take.
2. Always Know How Much You Can Risk. ♠

Steve ‘Zee’ Zolotow, aka The Bald Eagle, is a successful gamesplayer. He has been a full-time gambler for over 35 years. With two WSOP bracelets and few million in tournament cashes, he is easing into retirement. He currently devotes most of his time to poker. He can be found at some major tournaments and playing in cash games in Vegas. When escaping from poker, he hangs out in his bars on Avenue A in New York City -The Library near Houston and Doc Holliday’s on 9th St. are his favorites.