Online Poker Money Management

By Lou Krieger

Today you'll learn two new concepts: Money Management and Bankroll Management. They might sound like the same thing, but they're not.

Money Management: What Is It?

Money Management is an idea that should have died long ago, but didn't, and still makes its way into far too much gaming literature. The up-side of money management is based on the old adage, "Quit while you're ahead." Once you've won some predetermined amount, get up and leave the game a bit wealthier and a lot happier than when you walked in.

The down side tells you, "Set stop loss limits." Once you've lost, for example, $500 at one session, it's time to quit. "Give it up and go home," say the high priests of money management, "you won't make it back today. Come back tomorrow. Lady Luck cold shouldered you, and you ought to know better than to chase your losses."

Even money management adherents acknowledge that a poker game never ends, and it makes no difference whether you play four hours today and four hours tomorrow, or just play eight hours today. If that's the case, what is the logic behind these money management theories?

Does It Really Make Sense To Quit While You're Ahead?

Let's look at each money management component individually. Proponents of the quit while you're ahead theory say that quitting winners lets you take your profit out of the game, and not give back money you've already won. Actually, this makes sense only if you decide to quit poker entirely. If you plan never to play again, and you're ahead in today's game, quitting does allow you to permanently put today's profit into your pocket.

But if you quit winners today and lose tomorrow, are you any worse off than if you simply played on, and lost what you had won earlier in the session? Of course not. Coming back tomorrow simply allows you to pocket those winnings for a few more hours.

What About Stop-Loss Limits?

The same logic applies to stop-loss theory. If you are losing and leave the game, ask yourself whether you plan to play tomorrow - or next week, for that matter? If you answer "yes," then ask yourself this. Do you think you can win? If you plan on playing again and believe you can beat the game, is there any real difference between quitting now or continuing to play today?

I don't think so. If the game is so tough that you don't think you can win, you shouldn't play in it at all. If you regularly play in a game where you are not a favorite, you can expect to go broke - and it makes absolutely no difference whether or not you practice money management. But if you are a favorite, it pays to keep playing, regardless of whether you are ahead or behind at any given moment.

All You Need To Know About Money Management

Here's the only facet of money management that's true. If the game is good and you are a favorite, continue to play. If the game is bad and you are an underdog, quit! Never mind whether you're winning or losing.

Of course, the game can be terrific and you may not be a favorite for any number of reasons unrelated to the relative difference between your skill level and that of your opponents. You may be tired, emotionally upset from an argument with your spouse, kids or boss, physically ill and not able to concentrate, stressed out from work, traffic congestion or any other threat to the sanctity of the human condition which might put you off your best game.

You will save yourself a lot of money over the course of your poker playing career by following this simple rule: If you're not playing up to your best abilities, go home. The game will still be there tomorrow.

Game Selection and Money Management

Since one of the key concepts to winning at any form of poker is game selection, why would you voluntarily take yourself out of a good game, simply because you have won or lost some arbitrarily predetermined amount of money? Now I understand that if you've suffered a number of bad beats, and it's one of those nights that nothing seems to be going right, you might want to quit even though the game is good. That's OK, but only if you're quitting because you are no longer in the right frame of mind to continue playing at the best of your ability. Never quit just because you've reached a stop-loss limit.

What if you're in a good game and you're $1,000 ahead? Should you really quit when you're ahead? If the game is that good, and you have no other pressing commitments, why not go right on playing? After all, you're a favorite. Chances are you'll win even more money.

But whether you win or lose from that point on, those results were not predictable in advance. Your future results are always up for grabs, regardless whether you keep playing or pack it in, and return to the game tomorrow. The game goes on, and the segments of time during which you're playing are only arbitrary delineations.

Bankroll Management: How Much Do You Need?

There are also a lot of myths about money management, such as whether to quit the game when you are ahead of it, or quit when you are losing. Most of these money-management systems are completely bogus. But bankroll management, as opposed to money management, is not bogus and has serious implications for whether a player can expect to sustain him or herself given the relatively high variance that's predictable and to be expected if one chooses to play poker for a living.

While the size of your bankroll is a complex issue there is one fact you can bank on with absolute certainty: If you are not a winning player, your bankroll will never be large enough. To completely eliminate the possibilities of ever going broke, losing players need a big enough bankroll to outlast their life expectancy. Without one, they'll find themselves regularly infusing their playing stake with fresh cash.

Some players really do have bankrolls that will outlast their life expectancy. We call them "trust-fund pros." Many of them play every day and will swear to you that they are long-term winners. But they only delude themselves.

The Price of Living in Denial

The price of self-deception is high. Consider a 40 year-old trust-fund pro who plays $10-$20 and loses an average of one big bet per hour. If he plays 2,000 hours a year and lives to be 85, he can expect to lose $1,800,000 playing poker. Outside of a very select few, that's a lot of money by anyone's measure.

While there are more than a few trust-fund pros out there, most players underwrite their poker with their paycheck. Poker, to the majority of them, is recreation - just a hobby - and if they lose today, it's no big deal. They can supplement their bankroll on payday, and as long as their losses do not exceed their discretionary income, they don't need to concern themselves with having an adequate bankroll.

But suppose you're a professional and poker is your paycheck? How much do you need to keep from going broke?

How Much Do You Need If You Want to Play Professionally?

Although some poker players earn millions of dollars a year at the tables, most don't earn anywhere near that. In fact, the vast majority of poker players don't figure to beat the game at all in the long run, which is another way of saying their dreams and aspirations of playing poker for a living won't bear fruit, at least not without substantial improvement.

But with the current interest in poker, more and more players are lured by the appeal of the game, its lifestyle, and television's enthusiastic coverage ޠhope to play professionally. Many never get around to taking the plunge. But some do. How much they earn, and whether or not they succeed well enough to earn a living at the game depends on a wide variety of things, not all of which are related to an ability to play poker.

Obviously, an ability to play poker skillfully is a baseline requirement for success. If you can't play well, you won't earn a living at the game regardless of whatever else you might do, or whatever other personal, emotional, and intellectual attributes you possess.

A professional poker player should realize that every dollar he wins will not be added to his bankroll. After all, he has to pay rent and buy groceries just like anyone else, and his only source of income is his winnings. Lose, and he pays his bills the only way he can: by drawing down his bankroll. But there's a limit to how deeply he can dig without putting himself in jeopardy.

Reducing your bankroll converts capital into income - and that distinction is an important one. When a player on a short bankroll hits a protracted losing streak, he has only a few choices. He may have to get a job in order to build up his bankroll (in which case he is reversing the process and converting income to capital). He can also become a horse for someone else, and if he does, he will retain only a portion of his winnings, or he can quit poker entirely. None of these are very desirable options for working professional poker players.

When poker is your business, money - in the form of a playing bankroll - is your capital. Lose too much of it and you'll probably have to drop down and play at smaller limits, put the screws to your personal spending habits, and grind out an adequate bankroll. If you lose too much, you'll be so undercapitalized that you'll be ill equipped to even compete at all as a professional.

I've always used the figure of 300 big bets as a reliable bankroll ? and even that may not be enough. Randomness can produce some extreme results over the short run, and even $6,000 may be a conservative estimate for that game.

How Much Do You Need To Earn By Playing Poker?

Others, however, are entirely satisfied with a small wage from poker. Perhaps they don't have the same expectations or desires that other, more successful professionals have, or perhaps their poker income is merely a supplement to other income streams and they don't need to win all that much in order to live the life they desire.

With an increased interest in poker and more and more players entering the game, opportunity abounds as never before, and if you are interested in earning a living at the poker table there's probably never been a better time to give it a go than right now.

If you play cash games and you play them well, you should expect to earn approximately one big bet per hour, but that expectation is predicated on excellent play. Not good play, mind you, but outstanding poker, each and every day. One big bet per hour has always been a generally accepted notion, but no one's ever done any kind of scientific survey to validate it. Still, it seems to be a ballpark figure for most working poker pros. You can probably earn more per hour in lower limit games, and you'll make substantially less in larger games because the players are better. On average, if you play $20-$40 or $30-$60 games for a living and you play them extremely well, you should be able to win one big bet an hour. That's $40 per hour in the $20-$40 game and $60 an hour in $30-$60 games, and whether that's sufficient to support the lifestyle you desire is a question only you can answer.

How Much Can You Expect To Earn?

You will probably earn slightly more than one big bet each hour in lower limit games, but you might not be able to earn enough to sustain your lifestyle. At bigger limit games, such as $100-$200, don't figure on making one big bet per hour. In fact, if you're an expert player you'll probably win more on the order of one-half to three-quarters of a bet each hour.

Is that a good living? Like most things in poker, it depends. For some folks, it's lavish; for others it's not. These figures, by the way, are net estimates, and represent what you might expect to win after you've accounted for the rake and dealer tips. While the rake is a much larger percentage of an average sized pot in smaller games, the playing skill of your opponents is so far below what you can expect to find in bigger games that you should be able to more than compensate for it in your winnings.

Even if you're not an expert, but merely a very good player, and your earnings are half what we estimated an expert player can earn, it still might suffice. But pay attention to these caveats before you drop everything and head off to the nearest casino to make your living at the poker tables:

** If you're playing for a living at casinos that are not located in major poker centers, you will have a hard time finding games at higher limits. You might find that the biggest game in a casino near you might be $20-$40, $10-$20, or even less, and then the "big game" might not be spread on a 24/7 basis. If you don't want to move and set up shop in Las Vegas or one of the other poker Meccas and there's not a big enough game near home to support your lifestyle, you'll have some difficult decisions to make, because you'll either have to move to a locale that has big games on a regular basis, adjust your expenditures to meet the realities of a lessened income, or play poker online, in the privacy of your own home, which might enable you to earn a nice living but if carried to an extreme, it can deprive you of all the social aspects associated with playing poker.

** If you want to play very big games, such as $80-$160 and above, you will have to relocate to a major poker center, such as Las Vegas, Los Angeles, or Atlantic City ޠor else you'll have to go online to find the high stakes games you need in cyberspace. Are there high stakes games online? You bet. I've seen $200-$400 no-limit games on a few sites, and these are very big games indeed.

How Much Capitalization Is Sufficient To Give You A Chance Of Succeeding As A Professional Poker Player?

You'll need an adequate bankroll to sustain your efforts, and that's probably more money than you think you'll need. If you're going to play poker for a living, you should have at least 300 to 400 big bets as a poker bankroll ޠand 500 to 600 is better yet, particularly when you first begin your poker-playing career. And remember that this bankroll is for poker only; it's not for food, rent, utilities, clothing, or your car payment. You'll need a separate bankroll for that. We advise having 12 to 18 months worth of expenses in store to cover these costs. At the end of that period you should be earning enough to allow you to treat some of your winnings as income. Once you're able to do that, you can consider yourself a real professional. Up until that point, you're on probation.

If you think these requirements are restrictive, bear in mind that most new businesses that fail do so because they are undercapitalized, not because the product is inferior, the sales and marketing effort is less than adequate, or the management is poor. If you are serious about playing poker for a living, you need to view poker not as a game, but rather as the launch of a new business. In that regard you're no different from the person starting a restaurant or opening up a barbershop. If you are undercapitalized, you significantly increase your risk of ruin, and why would you want to do that? Instead, just continue to build your bankroll until you are adequately capitalized. Then give it a go. You'll give yourself the best chance to succeed if you do.