Bankroll Management

How do you maintain a bankroll that allows you to move up limits? Well, if you are a winning player and don't spend your winnings you will build your bankroll. It really is that simple. There are two ways to spend your bankroll. You can cash out and spend the money, or you can lose it. In my opinion a good bank roll management strategy is one that takes care of both these issues. As a newbie player your first objective should be to establish and maintain a bankroll at a low limit. As soon as you have established yourself as a winning player at that limit, your bankroll will grow. Beware that you can win for quite long periods due to luck, even though your skills are not developed to a degree where you have a positive long-term expectation. Also don't blame luck for your setbacks. You are in it for the long term, and the outcome of individual large pots will have huge impact on your bank roll in the short run. Yet, it is usually that one call you should have saved or the value bet you failed to make, that makes up the difference in the long run. So in order to get a reliable picture of your performance, it is strongly recommended that you keep accurate records, stating as a minimum the limit played, start time and finish time and + or - results for every session you play. You need this data in order to perform a reliable self-assessment.

Bankroll management is one of the most important issues facing any poker player. As a matter of fact I believe that unless your bankroll management skills are reasonably sound, the rest of your skill set will not help you much unless you are truly gifted. Yet, I keep seeing people posting the wrong questions on the forum regarding bankroll management, and therefore misinterpreting the answers they get. Specifically, the "Theory of Bank Roll Management (TBRM)" discussed by Angel Largay in his articles on this site, and thoroughly discussed in Mason Malmuth's classic "Gambling Theory and Other Topics" seems to give wide scope for misunderstandings.

The TBRM is a statistical analysis of what type of swings one should expect. In other words, how much should you expect luck to influence you before the long-term skill factor kicks in? This is dependent on a lot of variables, but as a rule of thumb a winning player should be able to withstand most swings with a bankroll of 300 big bets.

My main argument with the TBRM is that I think it is not really relevant to answering the most important questions relating to bankroll management. For instance, it assumes that you are winning player, and that you have access to good and reliable data on your hourly rate and standard deviation. In my experience this is simply not the case for the inexperienced player. Sometimes it's not even the case for the experienced player. Furthermore the 300 big bet rule offers no guarantees. My personal record daily swing is 207 big bets in one day! The TBRM is important in the sense that knowing what luck has in store for you will help you in tackling it mentally. But as a bankroll management tool I much prefer a simple approach that will make sure that you ask yourself the unpleasant questions.

The first thing you need to do is to decide what role poker should play in your life. Even though everyone seems to think that the sole purpose of poker is to make money and quit your job, I personally still believe that poker should first and foremost be played for fun. And in order to have fun, you should play at a level where the wins and losses bite, as this will make you try your hardest. But at the same time, it should be done within a budget that doesn't interfere with other priorities in your life. In short - I think it is extremely important that you allocate a monthly poker budget and stick to it. Keep your poker bankroll in a cookie jar and keep it separate from your personal economy. And leave your credit cards at home when you go to the casino. The thing is that when you lose you want to fight the humiliation right away. You are not capable of playing good poker in this upset frame of mind, neither are you able to make sound financial dispositions. The hardest call in poker is to know when it's time to quit. You might as well start practicing this right away, as you will have to make this call numerous times during your education as a poker player. If you fail to make it in time, you will get crushed. It's just a matter of time.

The next thing you need to do, is to apply a stop loss on every poker session you play. Mason Malmuth and Angel Largay both argue that if the game is good, a streak of bad luck early on should not scare you from keep playing. I strongly disagree.

First of all, the reason you might loose may seem to be bad luck to you, simply because you don't understand the superior playing style of your opponents. Table selection is something that you learn with experience, and even with a lot of experience, you still should expect to get it wrong every now and then. To an inexperienced player a super aggressive table might look like a good game, because you will see a lot of ugly showdowns. In reality this game might be a very tough game to beat.

Secondly, losing involves a lot of emotional stress. Instead of tilting, you should go for a walk to let the steam out before you re-engage in combat.

Thirdly, getting stuck often leads to money blindness. When you are seriously stuck most people tend to take bigger risks in order to get back even. They get the feeling that they cannot lose more then they have already, as the pain threshold stops at seriously stuck. There is no such thing as more then seriously stuck. So make sure to take home your losses while you still can, without having to leave your entire personal budget in the hands of Lady Luck.

Fourth, I recently experienced in Las Vegas how a bad run of cards can ruin your table image. Your opponents start to smell blood. When I see another player get hurt, I know that he will play weaker then normal. Therefore I will bluff him more frequently, and generally play tougher against him than against a strong opponent. So even though the game is generally good, and my game is still my A-game, a bad run of cards early in the session can turn a good game into a good game that is just no good for me, because everybody starts to play better against me.

Finally, you learn much more when you lose than when you win. When you win you feel invincible, and are busy congratulating yourself. But when you lose you try to find reasons. Make sure that you learn from the poker lessons you involuntarily pay for. Taking a break after a losing session replaying every hand in your mind, evaluating if you could have played it differently is the way we learn. And while you're at it - write down your thoughts and conclusions. Because chances are that you will face the same problems many times, before you finally manage to overcome the problem altogether.

When you have established yourself as a winning grinder at a certain limit, you should start to develop a hunger for the limit just above your current limit. Often you hear players complain that low limit games are unbeatable, and the solution to a low limit loss is to move up limit. In my experience this is rubbish. In general, the higher the limit the tougher the opposition. The successful players at the higher limits probably have paid their dues at lower limits too. You should therefore take on the limits one at a time. Furthermore, you should not expect to win at the higher limit at your first attempt. In my experience, it take several attempts to move up, as you will need to learn new things, and you will need to adapt to the different playing style of your opponents. Finally, there is no guarantee that you have what it takes to compete at this tougher limit. Yet, if you are competitive by nature, there is no excuse for not trying to move up when you have secured your bankroll at a given limit.

So when you attempt to move up you must decide in advance how much you will pay to learn at this new higher limit, and after you lose it you should go back to your bread and butter limit grinding back the loss before you attempt again. You should never jeopardize your bankroll by letting it fall below 300 big bets for the limit you play. If it does (and you should expect long losing periods every now and then - month long losing streaks are not unusual), you should move down limit until your bankroll is at 300 big bets for the limit you play. Don't let pride stop you from doing this. Some times your mind will be elsewhere causing you to play badly. This is ok - you're only human. But don't take it out on your bankroll. Also reading books and increasing your poker knowledge tend to destroy my game for awhile, while my old game falls to pieces and I am yet not fully confident in when and how to apply my new knowledge. Losing is normal.

If you manage to beat one limit and comply with these rules, you should be able to enjoy your poker hobby for free. You should also be able to work your way up limits without jeopardizing your bankroll in the process. As the 300 big bets is a value that increase quite a bit in dollars when you move up limit, you will have to decide how much you will invest in your poker education, through keeping the money in your bankroll, and how much of your winnings you want to spend (at the expense of a slower learning curve and move up limits).

By now you should be able to see why bankroll management is something that should always be on the forefront of your mind, no matter what limit you play. In the food chain of poker there is a constant stream of money up limits. The winning $1-2 lose some of his profits at $2-4, the winning $2-4 lose some of his profits at $5-10 and so forth. Within the last couple of years I have worked my way up from the $0.5-1 to the $30-60 tables with my initial investment of 100 bucks. I am currently trying to break through to the next level of $100-200. The master's classes at $100-200 are pretty damned expensive. And despite a solid bankroll, I could lose it all there if I didn't know when to back off. But to me, there is no difference between playing $30-60 trying to break $100-200 and playing $0.5-1 trying to break $1-2. The tools you need to manage your bankroll are the same.

Acknowledgment: Thanks to Leigh Lightfoot for taking the time to proof reading my articles.

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