Money management in poker, plain and simple

• Mike Caro   Exit

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Note: Not at the old Poker1 site. A version of this entry was originally published (2007) in Casino Player.

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You’re all grown up now, and it’s up to you to determine how much risk you’re willing to take in gambling and in life. Players ask me frequently about the secrets to money management. What they crave is some mystical formula that will keep them safe and defend against pain. Alas, there aren’t any.

The bigger risks you take, the more likely you are to find yourself suddenly wealthy and the more likely you are to go broke in the process. As poker Hall-of-Famer and 10-time world champion Doyle Brunson and I explained in a course we filmed last month for iAmplify.com: If you want more certainty of getting rich eventually, but not right away, you should be cautious with your bankroll. Here’s a tease from that Brunson-Caro course…

The course

There are mathematically solid methods for managing your poker bankroll. The so-called Kelly Criterion is one. It prevents destruction of your bankroll by requiring smaller and smaller wagering, when funds shrink. And it allows larger and larger wagering as your bankroll grows. This assumes you can find games small enough when a meager bankroll is in jeopardy.

Application of this Criterion to poker is problematic, because a poker game isn’t just one wager, but a complex series of interwoven wagers. You can decide the size of the game you’ll enter, but not the size or number of wagers you’ll need to make during the course of that game. For that reason, the Kelly Criterion is somewhat impractical for poker.

Also, there’s no real reason to protect a small bankroll indefinitely. If you lose it, you’ll probably find a way to gather another small bankroll from the real world.

The list

Here’s a short list of tips that will help you manage your poker bankroll…

1. Choose a number of minimum buy-ins to play at your beginning level.
2. Make sure the number of minimum buy-ins increases as you move up the ladder.
3. Choose a game you qualify for with the highest profit per hour.
4. Leave games when you don’t know why you’re losing.

First, let’s say the minimum buy-in for a $2/$4 fixed-limit game is $20. Assume you’ve decided that 10 minimum buy-ins is required to get started at this first level. That’s $200.

With just 10 buy-ins, you have a strong chance of going broke, because luck plays a big part in poker in the short term. But you figure you can get another $200 and try again later if you fail. Now here’s the trick that will gradually reduce your chances of going broke as you build your bankroll.

It’s point number two. Make sure the number of minimum buy-ins increases as you move up the ladder. For simplicity, we’ll assume the minimum buy-in required is always proportional to the size of the game.

This means that if you set a requirement for yourself of at least 10 minimum buy-ins to play $2/$4, then you should increase that to, say, 12 when you jump up to $3/$6. So, instead of your bankroll staying proportional — $200 to play $2/$4 and $300 to play $3/$6, you now require $360 to play $3/$6.

Doyle and I recommend that you continually increase your required number of minimum buy-ins as you move up levels, so that if you’re playing $200/$400, you need, say, 50 minimum $2,000 buy-ins — or $100,000. If you do it that way, the bigger your bankroll grows, the more protection you provide it.

Chances enhanced

And if you lose and no longer have the required number of minimum buy-ins to sit at that previous level, move down until you earn enough to move up again. Do it that way and money management becomes simple, and your chances of lifelong success are greatly enhanced.

Number three reminds us that we don’t always have to play for the highest stakes that we qualify for. Choose a game you qualify for with the highest profit per hour. If there’s a more profitable, smaller game, sit there.

And number four says to leave games when you don’t know why you’re losing. That’s very important. It’s okay to stay in a game if you know you’ve been unlucky so far, and the conditions are good enough that you expect to earn a decent profit from now on. But sometimes you’re bewildered by your losses, and you can’t explain them. Maybe the game isn’t as good as you assumed. Whatever the reason, if you don’t know why you’re losing, you’ll do your bankroll a favor by simply quitting.

If you have the skills to win and always play according to this list, you’ll have an excellent chance of building and maintaining a significant poker bankroll. — MC