Pinned Become a winning player at online poker - Part III - Bankroll management

    • Become a winning player at online poker - Part III - Bankroll management

      [Die deutsche Version gibt's >HIER< ]





      This famous quote of one of the most successful multi billionaire investors of our time can be applied to pretty much any chapter in this guide. The context cannot be more on point for this chapter though. There are many risks involved as a beginner that are very tough to avoid and manage and most of them stem from "not knowing what you are doing", because you are still learning how to make it. Making mistakes and thus increasing the risk of ruin in the context of bankroll management is one of the major factors that blocks a beginners path to success in online poker. This is sad, because with a little bit of knowledge and planning, these additional risks can easily be avoided and negated.

      I believe that most beginners when seeing the structure of this guide will think bankrollmanagement is the chapter they already are pretty good at, because it is so easy and because you only have to deal with it once in order to become knowledgeable enough on the topic to master it. Those beginners are right that it is easy to learn the basics of bankroll management, but they are dead wrong if they think engaging in bankroll management content and the application of it is a one time deal and does not require attention regularly.
      A pokerplayer that is not constantly evaluating and adjusting his play according to their bankroll management guidelines is a fool. Bankroll management is our safety net, mastering it means finding a good balance between risk aversion and risking too much. Being able to judge yourself and your assets in poker in order to put yourself in the position to win the most in context to the chosen risk, meaning getting the maximum return on your investment of time and money is key to be successful. So take this chapter to heart, especially in the early steps of your poker career it might save you from ruin.

      The roll of variance and deviation in risk assessment


      There are two major factors outside a poker player's control that are important: variance and deviation. Depending on the poker variant those factors are bigger or smaller and their evaluation is key in the risk assessment that helps us to outline the parameters of our bankroll requirement.

      Variance is the term used for the discrepancy between what you would have gained or lost when you would run exactly on center average of all luck based factors outside your control. These luck based factors are things like card distribution, board runouts, how often you cooler someone versus getting coolered outside of tactical skill and the amount of those setups occuring more frequent or less frequent than average to one side of the spectrum. A lot more smaller factors come to mind, but those are the major ones. You could even add stuff like how often your opponents tilt versus you which is not really rationally and empirically measurable, but could influence your results in a certain way.
      So variance is not only used to describe "running below expected value(EV)", because EV is just some of these factors, but describes the influence of all factors outside your control that influence your results from the center average.

      We need to quantify variance in order to assess deviation in our variant of play. Variance factors dictate the amount of deviation you experience for it. Deviation means how much your results may "deviate" from the center average you would achieve when variance factors influence on the result would be zero.
      So given a certain sample of hands played, you have parameters like your average winrate that would tell you how much you would have won inside the statistical norm. Now you have to make an assessment of how much variance actually resides in the variant and format you play and by that you can gage how much your results could deviate from the center average over the given hand sample.

      So while you have an "EV-winrate", meaning a certain number that you would achieve if variance had no effect, applying variance parameters with different values you would instead get an array of numbers that are possible to get as a true winrate after factoring in variance parameters with varying magnitudes.
      So your true winrate could fluctuate quite a bit around the center average winrate and it is not necessarily that it would be equal to both sides of the spectrum, meaning the interval of possible result winrates could be more towards the plus or the minus side of things depending completely on your variant and the variance in the games you play in comparison to your skill versus your opponent skills. This is important to realize. It is incorrect to assume every single poker player would while being confronted with the same amount of variance end up with the same deviational interval of possible winrates. In fact a player with a bigger winrate will most certainly have a smaller deviation interval that is also more orientated in the plus side of things, while a breakeven or slightly winning player can have a much bigger interval that could also be more orientated to the minus side.

      Simulating variance and deviation to gage proper bankroll requirements


      In order to understand this topic I would invite you to run a few simulations with the variance calculator from pokerdope.com: pokerdope.com/poker-variance-calculator/

      The simulator is pretty intuitive, but let me explain it a bit.
      At the top you have several input fields that allow you to input the parameters you want to research. Observed winrate is completely optional, it stands for the biggest winrate you have seen in the field of players for your variant at the given scenario. Leave it empty or leave it at 10 BB/100. Standard deviation means how many big blinds(BB) is the on average deviated size from EV-winrate over a given sample of hands. If you hover over the "?" there are proposed numbers for certain variants of play. They should give you a certain guideline and you can start to play around with these numbers to see how it would influence your true winrate interval. Numbers of hands to simulate is pretty self explanatory.

      Below you always get a result graph that shows you 20 chosen sample runs, always displaying best and worst case and the confidence intervals. Confidence interval means how many of the sample runs made are inside of these parameters, so a 70% confidence interval contains an area where 70% of all simulation runs end up in. So you could say that in 70% of the time your winrate would end up in this result interval. This is important to know in order to read the graph and decide how accurate the result is. You will see that the 70% confidence interval is always much more narrow than the 95% which should appear pretty logical. The two confidence intervals should help you see fields of best worst case in comparison to EV-winrate and where most of the sample runs will land.

      Below the graph you will see a numerical result analysis. It lists all the entry parameters, shows you standard deviation for the sample in BB and BB/100(BB per 100 hands), the BB and BB/100 results for the confidence intervals. The probability of being down money after the given sample size with given start parameters, the probability of running above your proposed winrate and below it (try different winrates and compare, see how deviation for bigger winrates influences this) and it will also show you the minimum desired bankroll amount in order to run a risk of ruin of less than 5%.

      Further down the site also gives you a brief overview of what your biggest downswing will probably come out to in terms of BB depending on your parameters. This will most likely blow your mind if you see how much and how often you can encounter massive downswings. Like in the previous mindset chapter, knowing and confronting these facts before playing and acknowledging their existance and probability is of utter importance to not risk self-destructing when encountering them and not being able to rationalize how brutal and vicious poker can be.

      If my explanation was not good enough the site offers a tutorial itself below, where you can read up on all the terms and parameters and how to interpret the results shown by the site.

      So if you feel confident using the tool, start with a certain set of parameters and change them and observe the changes in the result. Focus especially on how a bigger winrate or a bigger hand sample influence deviation and downswing amounts. Get a feeling of what will happen if your winrate is small and what will happen when you improve your winrate. You might realize how becoming a bigger winner might shield you from worse and helps you out on the mindset battle, while knowing exactly how brutal it could get from a mindset standpoint will help you rationalize while playing. This is the closest in theory and simulation you can get to visualizing the battle at the tables that is ahead of you. Use it and brace yourselves! Remember the Sun-Tzu quote from the introduction.

      The post was edited 3 times, last by wafflecrunch ().

    • How to set proper bankroll management thresholds as a beginner


      We face a certain dilemma when trying to outline bankroll thresholds as a beginner. On the one side we want to be cautious with our money to the level of complete risk-aversity, while on the other hand we want to progress as fast as possible towards stakes where we can see a return of our investment that justifies spending this much time on online poker.
      Certainly there will be some kind of sweet spot for everyone in between those two opposing approaches where the tradeoff between increased risk is worth it due to the better returns. This is where the perfect management skills come in play and why it is so important. Hitting the sweet spot can fast track your way towards success, meaning saving you tons of hours playing to either get back losses from risking too much and crippling your bankroll, or on the other hand grinding and grinding on the smallest stakes because you are so hesitant to risk more out of risk of ruin or risk of stake decline. Hitting the sweet spot in terms of bankroll management and reassessing it is one important partial tool to achieve maximum hourly rate, to be a successful and efficient online poker player.

      So how do we approach our own bankroll sweet spot?

      We run our own variance simulation. For that we must be brutally honest with ourselves. If we do not have a large winning sample and are a proven winner on the stake, we take a measely winrate of 0.1 to 1 BB/100 as our proposed winrate parameter and run it with our deviation-approximation for the variant we want to play and take a look at the downswing section. We want to see at what number the downswing amount drops below a certain percentage range. It is pretty clear that with a non-existant winrate of 0.5 to 1 BB/100 or even if we are completely break-evenish we would require more than 5000 stacks in order to counter every possible downswing and not go broke or have to move down. You can see that this is not very practical. So here comes the risk factor back into play. If we agree that if we lose 50 buyins for the stake we move down or restore our bankroll if we are already on the lowest stake, we are able to significantly lessen the bankroll requirement, because we only have to adress the downswings that are smaller than 50 buyins. At this point we did not even consider possible rakeback. So if we take rakeback as an additional buffer for us, reminder we are beginners and prone to make mistakes, we should try to have enough buyins available to cover us enough so that if we lose 50 buyins and are still able to move down, we still have 50 buyins to lose on the stake below. This pretty much sets us up as the following:

      20 to 50 Buyins for the current stake + 50 Buyins for the stake below = Minimum requirement for any stake -> Any time we hit 50 buyins left for the lower stake we move down no matter what

      Example:
      We have managed to successfully beat NL5 and are now playing NL10. Our bankroll currently is $500, meaning we managed to have 50 stacks for NL10. If we would lose 50 stacks on NL10 we would have $0 left and are broke. So what we actually are looking at is having 50 stacks for NL5, which is $250. So besides the $250 amount where we will move down, we have a cushion of $250, meaning 25 stacks where we can play on NL10. So if we lose 25 stacks on NL10 we move down again.

      As you can see we are aware that we make mistakes, that is why we take rakeback which acts as mistake compensation for us out of the equation of our winrate. Also we keep 50 buyins for the lower stake to avoid the risk of ruin by variance through downswings. The rest is the money we can play with on our current stake.

      This works the same for taking shots at the next higher stake. You keep 50 buyins for your current stake and start to develop additional stacks for the next stake level until you have an amount that you feel comfortable with to shot the new stake in order to keep playing there for a bit. Again you can make a variance simulation to assess how many stacks you should reserve for having a certain amount of hands on the stake before you would have to move down again almost save from variance. I personally would suggest to never shot an amount below 10 stacks, I would much more encourage you to have larger shot money available the earlier you are in your poker career, because it can be especially hard on a beginner to move down again and dealing with that on top of the lost money and you are making mistakes. So in order to establish yourself on the next limit more time and financial cushion is what you want.
      Often especially when you are beginning to shot certain stake limits the established regulars will try to get you in more variance spots. The reason for this is that they know you are new to the stake and are also on a restricted shot-roll, so it is in your interest to avoid variance even if it means giving up EV-winrate to the regular and the others at the table. The more funds you have for shotting, the less hard it is to deal with this phenomenon which is a sub aspect of what is known as "money scaredness". Next to the psychological aspect of playing for more money the point of having a very restricted shot-bankroll another disadvantage in comparison to the established players. If you are aware of this and take financial precaution, you are able depending on your mindset and skill level to lessen the effect and even negate it.

      So saying you need 20 stacks to shot and we are using a 50 buyin safety net you would need the following amounts to shot at certain stake levels:

      50x current stake level buyin + 20x next stake level buyin = bankroll requirement for shotting the next stake


      LimitsMinimum to shotMove down at
      NL2 to NL5$200$100
      NL5 to NL10$450$250
      NL10 to NL20$900$500
      NL20 to NL30$1600$1000
      NL20 to NL50$2000$1000


      Remember these figures are meant for beginners. Once you beat a limit and are a certain winner you can rerun your variance simulation and decrease the amount of stacks you want as your safety net and also start to shot more aggressively, meaning to reserve less stacks than 20 towards the shot money. This is all about your personal sweet spot, so take my numbers as average beginner figures and model them towards your own situation on your simulation data.
      For example if you only require 40 stacks on your limit now and are also shotting more aggressively the bankroll requirement can drop easy by 25 to 30 percent. But always remember, less requirement always means more risk and it is up to you to make a proper assessment of how much risk your knowledge level can handle.

      The post was edited 4 times, last by wafflecrunch ().

    • Setting up accounting infrastructure to manage your online bankroll


      Let us face it immediately. With the demise of Pokerstars VIP-system and other sites being small, we have to become very flexible in distributing our bankroll on multiple sites in order to cover our requirements. The time of playing a single site and not caring about what other sites are offering and even playing only a single site at a time are over. You are simply missing out on squeezing the most value out of the situation if you play with mindcuffs and are loyal only to a single site.

      So in order to be able to take advantage immediately on bonus offers or promotions we need to be able to move significant parts of our bankroll pretty quickly. Using standard banktransfers just does not cut it. It can take up to three weeks depending on the performance of the site you want to deposit or withdraw in order to receive your funds and redirect them.

      There are only three options that allow you to quickly distribute funds onto different sites:

      • Credit cards
      • Online Payment Services like Skrill, Neteller, even Bitcoin
      • Player to Player Services (Use at your own risk!)


      The major issue is obviously security. I cannot say that I would even go so far and say that any of the methods in conjunction with a poker site are 100% save, but you can maximize your security through using certain methods over others if available.
      I would always have a credit card available linked to a bank account. Depending on your country and its legislation this can be more or less problematic in legality and in drawbacks on transaction fees. What is nice to know is that certain online payment services like Skrill and moneybookers offer credit cards themselves that can be used with the online payment account. This means you can actually go to your bank's ATM and withdraw straight from your account. A lot of player use this method to cashout for expenses. Depending on the card and the bank the fees are ranging from absert to agreeable transaction fees.

      What is important to know is in order to comply to money laundering rules online payment services and poker sites apply certain limitations and deposit/withdrawl-rules that you should be aware of before using a certain deposit method. You cannot go ahead and deposit a large sum onto your account from your bank account or creditcard and continue to withdraw it to a payment service account without having used the money to play. It should be obvious why, but I wanted to explicitly warn you that you always check deposit and withdrawl-rules for the site before you deposit. Else there can be annoying to frustrating holdups and inqueries coming your way from the site or even your bank.
      I got my creditcard blocked by my bank one time just because I made a larger deposit via creditcard to Pokerstars and did not call them ahead to say it is ok. Maybe it was the banks way to tell me they are watching me, or there was an automatic system flagging the transaction as outside the norm, you never know. Just be prepared that the more you are pro-active and informed about every transaction happening, the less you will become entangled in transaction issues. There is nothing more frustrating than having your bankroll locked up where you don't want to play currently, or on an account from which you cannot move it fast to where you need it.

      There are banks that are more or less good to use for online poker. As this is a pretty diverse issue ranging from country to country, you have to make your own research on what bank to use. Compare fees, read their terms of services, call-in anonymiously to inform yourself on their stand and rules on online gambling and poker. You should be able to see if your current bank is good to use or if you maybe want to signup another banking account to deal with your poker winnings.

      Another important issue are currency conversion fees. In order to avoid most of them, the best way is to have online payment accounts in multiple currency, I would suggest a dollar and a euro account if you play on EU-sites. In general at least have USD and your local currency available on the online payment services. You can have multiple accounts there. Take advantage of it.

      You can also use affiliate bonusses to signup your online payment accounts. Pokermarket is offering them here: pokermarket.com/deals.php#/tools

      I would suggest to at least use neteller and Skrill, which are the major two payment services eligeable on poker sites, while not every site allows both. That is why you should have both availabe, each an USD and a local currency account at least.

      In terms of security Skrill might be the best just because they are listed on the british trade index and thus must comply to european banking laws and in case of dispute you can appeal them in an UK court. Both neteller and Skrill are save to use, offer advanced security layers for your account (security token, security token app) and are the fastest way to get funds from A to B in the online poker world.


      How to distribute your bankroll on pokersites and payment services


      So how should you store your bankroll? My advice would be to have the least amount need to play for two or three days on your site, which is around 15 to 20 buyins. The rest of your roll should sit either on payment accounts or on other sites depending how much you can stretch your roll. The more stacks you have for your limit the more partial bankrolls you can have on different poker networks. Always have at least 20 to 30 stacks sitting in your online payment accounts to be able to quickly distribute them to sites where you need them.

      The advantages of storing your roll not completely on a single poker site are the following: security from issues with the site, also you are not gaining any interest on your roll on the sites and they are free to use your money for their needs, why let them if your money could also gain interests for you that might simply cover inflationary losses? Also you are always eligeable for deposit bonusses because you are always able to deposit without having to withdraw funds from the site. Pokersites will encourage you to leave your money on the site by always offering deposit bonusses that get waived once you withdraw, so keep in mind to always be able to dodge these efforts to bind up your funds by not having to withdraw and the ability to get quick money elsewhere. It happens often that unexpected expenses come around and you have to withdraw from your poker bankroll, for example because of a hardware failure that has to be adressed immediately. You should always store most of your bankroll at a place that is flexible, offers fast transaction options to you and poker-sites and pays you interest for storing your funds there. That is not met by the player-account of a poker-site!

      This chapter was either pretty obvious and boring for you, or pretty eye-opening. I just felt that a lot of pokerplayers are terrible in terms of managing their bankroll properly for multi-site-play and I wanted to give a brief overview of what I think is the best way to tackle the problem and make it efficient and profitable.

      The post was edited 3 times, last by wafflecrunch ().

    • Further investment strategy for future more liquid bankroll situations

      Once you reach a certain bankroll level you might want to start looking at other oppertunities than simple shot taking in order to advance your hourly rate. Instead it might be more lucrative to invest a part of the bankroll surplus in other endevours and not keep everything for shotting.
      If you look at it this way, like we figure out a good median of risk and reward, we apply the same strategy towards investment. If you like you can see shot taking as a risk investment too, you put money on the line, which can lead to loss or a nice chunk of return. But there is significant risk involved.

      There are other options to invest in poker, while they hold completely different amounts of risk and reward:

      • Private personal coaching
        Low risk, reward is reducing risk for shot taking, increasing hourly rate at current stake through advancing your skill level by plugging leaks and get new strategic input. Even as a beginner getting private coaching might leap you miles ahead, if you find the right coach! See my strategy articles if you need to refresh your knowledge on coaching and how to evaluate it. >Coach listing on pokermarket

      • Staking other players or buying action/shares
        Medium to high risk, reward depends on the staking arrangement, amount of influence applyable depends on the deal/variant of the stake (stakeback, coaching, reviews)As a beginner I would only get into the staking side yourself once you have a solid knowledge in order to research your stakees skill level and make a good estimation of the involved risk and reward, so most likely you should get into this subject once you are well settled into your poker career. This topic is more relevant to a beginner from the stakee side, meaning you find someone that stakes you and reviews/coaches your progress for a share of your winnings, which can be a really good or really bad decision, depending on your partner and how you deal with that pressure. Playing with other people's money can make you risk-averse or risk-seeking, you will only know once you played with someone elses bankroll money. Both things can be pretty bad, so in terms of being a good stakee you should be able to make it a win-win by trying to play your best without increasing or decreasing risk level in your play and using your staker as a coaching oppertunity to help you both make more money. > Staking Sektion on pokermarket

      • Buying software or hardware related to poker
        Only buy software you will want to use regularly, never impulse-buy, always do your research and compare, ask in forums for advice and user experience reviews. A beginner should own a tracking tool, that is it. Everything else will be so expensive that it will hinder your progress and instead you should look into buying advanced tools once you are in the progress of getting to NL25 in order for the price of tools to not significantly affect your entire bankroll. Having an SSD drive or a second monitor will help you in the longrun a ton, if you can manage you should invest into these hardware improvements if you have them not available right now

      • Yourself
        There is nothing wrong with spending poker money to treat yourself. You should choose stuff that helps you refresh and that feels rewarding. There is nothing like the first time walking out of a store or ordering something that you bought with poker money you won. Incredible feeling. The motivation and the reminder of what bought it when you use the item should reinforce your hunger to get more. It is a pure form of extrinsic motivation and should help you strive for bigger and better things. It should also reinforce your will to work harder for poker, so that is good too. Just do not go out and put more than 5% of your current roll on a purchase. Rule of thumb is, when an item requires you to withdraw more than 5% of your bankroll, you should wait with the purchase until it is no longer more than 5%. I find it is a good limiter to spending and of course you should limit your spending to an amount per month too.

      • Investing into save common investment oppertunites
        Low to medium risk, low to medium rewardDepending on your country of origin there will always be oppertunities to a medium to longterm arrangement of investing capital for a small return above the inflationary rate, which conserves and slightly increase your overall networthLike staking this is probably a field that you will takle once you have a lot more cash than you can invest otherwise. Nice place to strive too, but far in the distance. A lot of high stakes poker players are also excellent stockmarket traders, or capital investors, a lot of skills you learn in poker, especially the statistical analytics can be applied towards investment strategy.


      Getting good at gaging investment oppertunities being it poker related or otherwise will get more important the more money you are making. Once you start to have the funds for it, it will be a lot of try and error and failure experience that will make you a contender in this field and helps you make quick decision on the really good but always time critical investment oppertunities.
      At the end we all know there is a clock on poker, the games are getting tougher and tougher and the legal state of poker is always up to debate around the world. In order to plan ahead you should, once you are a good regular at noticeable stakes, spend energy and time on how you can make your money work for you.

      This last chapter was just an excurse on that, not very detailled and full of really juicy investment tipps, more a teaser of what could be on your mind once you make it from a beginner to a respectable large winning online poker player that can start to think of taking things to the next level.
      So as you see bankroll management is not only important as a beginner, but significantly more important once your bankroll gets larger, in context of maximizing profit due to smart investment.

      Thanks for reading, if you have questions or feedback, post it in the thread! Next time I will talk about poker tools, which ones are useful for a beginner, what tools make sense at what step in your development and how you incorporate them into your learning process.


      Become a winning player at online poker - Part 4 - Tools

      Click here to read the next article!