Note about this article:
Many visitors of the popular
poker website, TwoPlusTwo.com, have read my article titled, "Why
Money Management May Work For You In Some Cases" in the August
issue of their Two Plus Two Internet Magazine. If you haven't, you
can get to the August issue by clicking
here. In that article, I make reference to a previous article of
mine that appeared in Two Plus Two's May issue. Because Two Plus Two
is very writer friendly, they do not keep their internet magazine
writers' articles posted on their site for more than three months.
Some Two Plus Two visitors have e-mailed me wondering if there is
any way that they can still get a chance to read my article from the
May issue. So, by popular demand, here it is:
Smack Some Sense Into You About Money
by Mark Blade
Before we get started, you must understand an
important term distinction. “Money Management” refers to the
strategy of controlling your wins and losses by quitting your
current playing session once you are up or down a certain amount of
money. It is ripe with flawed reasoning. “Bankroll Management,” on
the other hand, refers to having an adequate amount of money to
insure that you don’t go broke at the level of stakes you are
playing. It is a very valid and useful concept.
Smack Some Sense Into You About Money Management - Attempt #1
You’ve probably entertained the notion of money
management because of something like this. On June 11, you walked
into a casino and played poker. After 3 hours and 45 minutes, you
were up $500. If you had just walked away at precisely that moment,
you’d still have that money. But instead, you kept playing and ended
up down $1245. So you thought to yourself, “Eureka! From now on, I’m
always going to quit when I’m ahead by $500.” Sounds good. I’m
following you so far. But let’s see how this really plays out.
Assume that you normally would play 8 hours a
day, 5 days a week, except that you will now cut your days short
whenever you reach that magic $500 mark. You will have three types
Result Category #1
Some days your plan actually works. Some days
you were destined to lose that day. Or you were going to break even
or just make between $1 and $499. But instead, you hit that $500
mark and quit. That worked out great! You really saved some money
on those days. Congratulations! Maybe you’re smarter than I
Result Category #2
Uh-oh. Wait a second. Other days your plan
doesn’t work out so well. You stopped playing at $500, but little
did you know that you were destined to make more than $500 that
day. You were going to make $501 or $753 or maybe even $2215. Those
days it didn’t work out so well, did it? It actually cost you a lot
of money. Hmmmm?
Result Category #3
These are the days when you were going to lose,
break even, or make between $1 and $499. But on these days, at no
point during the day would you ever hit the magic $500 number. So
these days are irrelevant. You would play the full 8 hours whether
you had your money management system or not.
Money Management Put To The Test
So we’re only really debating Category #1 and
#2. Let’s look at these days, and let’s zoom in on the precise time
that you hit your $500 mark. Remember, you came up with your “Eureka
Plan” on June 11. Now it’s June 12 and you’re putting it into effect
for the first time.
Sure enough, 4 hours and 22 minutes into your
playing on June 12, you accumulate your desired $500. Freeze time
and let’s think about this. Is today a Category #1 day? Will you
save yourself money by walking away right now? Or maybe it’s a
Category #2 day? If it is, and you got up now, you would be missing
out on a lot of money. So how do you know what kind of day it’s
going to be?
You don’t. And therein lies the rub for money
management. You have no idea if you are destined to win or lose from
that $500 point on.
Wait a second. I just lied. You do have an
idea. Assuming you are a winning caliber player, you know that you
play better than your competition. Let's say you average one big bet
per hour. If you stay and play on, you can expect to make your one
big bet per hour on average for every additional hour that
you sit there at the table. Sure, it won’t be guaranteed for any
particular hour or short stretch of hours, but in the long run, that
is what you will earn.
So money management strategies really just cost
you money because they prevent you from putting more hours in at the
table which would put more dollars into your pocket.
What About Stop-Loss Strategies?
They work exactly the same way as the
“stop-win” strategy that I just debunked. Think about it and you
will see that you will have the exact same three result categories
except they will be flip-flopped. And when you get to that decision
making moment when you’re down $500, you still won’t know if
you are more likely cutting off future losses or future
gains. Whoops – I lied again. If you are a winning caliber player,
you do know what’s more likely from that point on – Gains.
Moral Of The Story
Keep playing whenever you have an advantage
over your competition.
Smack Some Sense Into You About Money Management - Attempt #2
If you still don’t quite grasp this concept,
Here’s another way to look at money management
strategies. What it all boils down to is that you are picking a
specific time to stop playing. You are picking this time because
during one particular session, which you define as a day at the
casino, you hit some predetermined winning or losing amount number
and hit the eject button on your poker seat. Let’s say that this
happens when you lose $500 at 8:17pm on April 6.
Then what happens? You walk out of the casino
and go home. You put your wallet on your bedside table, put on your
pajamas, and climb into bed and go to sleep. You wake up, take a
shower, have breakfast, grab your wallet and hop back in your car.
You go to the casino, plop yourself down at a
table and start playing again.
This is your new session on the glorious new
day of April 7. You are going to start your counting from zero again
and wait until you win or lose your predetermined $500. But wait a
second. What if on April 6 at 8:17pm you had walked out of the
casino, walked over to your car, kissed the hood ornament for good
luck, and then walked right back into the casino? What if you called
that your “new session?” Hey, that could save you on some gas
money too! You could just start from zero then and decide to leave
when you won or lost $500 from that point on.
Don’t you see that that is what money
management techniques are really all about. Once you’re really
evolved, you wouldn’t even have to get up out of your seat and go to
kiss your car hood ornament. You could just do what I do. Every time
I win or lose $500, I just stand up, kiss the nearest waitress on
the lips, plop myself back down, and start my new count again from
C’mon. You’re a smart, experienced poker
player. Leave the money management nonsense to the novices.
Additional note about
this article: If you are interested in purchasing
PROFESSIONAL POKER: The Essential Guide To Playing For A Living, it
is available at Amazon.com (usually at a very nice discount) by
here. If you are interested in reading the follow-up article to
this one, you can read it on the Two Plus Two Internet Magaine by