I was naïve about poker bankroll management when I started playing poker seriously. I followed the standard advice about how to manage your poker bankroll which basically amounts to Chris Ferguson’s bankroll rules for his “zero to hero” challenge. While Ferguson’s poker bankroll rules are great for a professional moving up in limits for a prop bet, they’re not so great for a person trying to establish a solid bankroll for playing in the long run. When I figured out my Risk of Ruin, it turned out to be almost 20%. That’s a 1-in-5 chance of going broke.
These are my babies. Don't fuck with my babies.
The truth is; I almost did go broke. When I was playing the $20 Sit ‘N Goes I went through a downswing that brought me 15 buy-ins away from going broke before I realized what was happening. Fortunately, I was able to pull out of my nosedive and build my bankroll back to a reasonable level. Now I follow new poker bankroll rules. Here they are.
Determine Acceptable Risk
Before you determine what your poker bankroll should be, you should figure out how willing you are to go broke. For me, a 1-in-5 chance of going broke was unacceptable but I decided I could live with a 1-in-20 chance of going broke so my acceptable Risk of Ruin is 5%. Here’s how I figure out my comfort level given my acceptable Risk of Ruin.
Risk of Ruin = (1/7)^comfort
.05 =(1/7)^comfort
Comfort ~ 1.54
So my comfort level is approximately 1.54. That might not make sense now but stick with me, I’m going somewhere with this.
What is The Standard Deviation of Your Game?
Standard Deviation is a statistical term that encompasses the average set of numbers around the mean. The standard deviation varies depending on whether you play cash, Sit ‘N Goes or Multi-table tournaments. Personally, I play SNGs and the standard deviation for a SNG is 1.6 buy-ins.
What Should My Poker Bankroll Be?
Now that I know my Standard Deviation (SD) and my Comfort level, all I have to do is plug in my Return on Investment (ROI) and I’ll find out how much of a bankroll I need to play. My ROI is around 12%. Here’s the formula:
# of buy-ins = (Comfort x SD^2) /ROI
# of buy-ins = (1.54 x(1.6)^2 )/0.12
# of buy-ins = 32.85
I play the $30+3 SNGs on Full Tilt, but I plan on moving up to the $50+5s in the next month or two so here are the bankrolls I need to play:
$30+3 = 32.85 x $33 = $1084.05
$50+5 = 32.85 x $55 = $1806.75
Of course there are other considerations as well.
Flies in the Ointment
There are a couple of problems with the formulas. First of all, my Risk of Ruin assumes that I’ll never move down in limits. Of course that’s not true. Like I explained in How I Like To Move Up In Limits, I slowly ease my way into higher limits and move back down when things don’t look so good. My bankroll is much safer and my Risk of Ruin is much less if I’m willing to move down in limits.
The formulas also assume that I’ll always have a 12% ROI. That’s also not true. I could have an epiphany and become a much better player. In that case, my ROI will go up. The opposite could also be true. I could be a 12% player at the $30+3 level, but only a 5% player at the $50+5 level. In that case I’ll need a much larger bankroll to move up.
There are other factors to consider as well. What if I decide to add more tables to my sessions? Right now I 6-table, but what happens if I decide to 10-table? My ROI is likely to go down and I should raise my poker bankroll requirements accordingly.
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As you can see, poker bankrolls are dynamic. You can’t go by any static rules when it comes to choosing the size of your poker bankroll. These formulas will give you a good guideline for setting a reasonable bankroll, but it’s only a guideline. Make sure you revisit your bankroll management strategy frequently and make the necessary adjustments to avoid going broke.
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