7/25/2010--My consolidated bankroll strategy.

Disclaimer for any cash players that may be reading this:

I play strictly tournaments. I understand that some of the things in this post don't apply to cash games, where the swings at the "nosebleed stakes" can be much larger, and where some players have won or lost over a million dollars online in one day.

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There are a lot of posts on 2+2 about bankroll strategy. Some would say that it's the most important aspect of being a good poker player, and I agree. You can't be a succesful poker player if you can't manage your money.

Good bankroll strategy is pretty well mathematically defined, and like poker playing in general, it presupposes a long-term perspective. It's about playing at levels you can handle, from the standpoint of finances and playing ability. It's about not moving up too fast when you get a big score. It's about having enough in reserve to deal with the downswings and variance. And it's about having enough in your "roll" to take the fear and the "what if I lose my money" concerns from affecting your play.

I understand the mathematical big-picture concepts behind bankroll managment, but not all the mathematical detail. In general, it works like this:

To be able the weather the storms, whatever type(s) of poker you are playing, you should have a minimum of 50 buy-ins in your bankroll--more if you play high-variance games such as large multitable tournaments, and more if you play at higher levels, where the players are tougher and your ROI (return on investment) percentage will go down. Where it gets tricky is that every game has it's own mathematical implications in a "risk of ruin" formula.

For example, if I played only STTs (single table tournaments), where the variance is low, about 50 buy-ins are probably fine through the micro (< $5) and low (< $20) tournaments. But for tournaments with thousands of players, the variance is great because I will get much larger cashes, but cash much less often. MTT (multi-table tournament) specialists usually play with a bankroll of between 100 and 300 buy-ins.

Where it gets tricky is that I don't really specialize. I want to get more MTTs in the mix, but it can be hard sometimes to carve out a block of 8 hours or more to play. So I play STTs, MTTs, and everything in-between.

In theory I could do the math, such as figuring out my standard deviation for each type of tournament, then putting it all together. I've never seen someone do the math for something like that, but I have a pretty good idea of how it would work.

I could figure it out, but I don't want to mess with it. Besides, I play so many different types of tournaments that I wouldn't have a large enough sample size for each type to make the math work. You can't calculate a reliable standard deviation from a small number of data points, I know that much.

I decided on three basic assumptions:

1. Everyone should start with at least 50-buy-ins, whatever game(s) they are playing.
2. As I move up to higher levels, and as I put more MTTs into the mix, I will need more buy-ins to play safely (in mathematical terms, more buy-ins equals a lower "risk of ruin").
3. I want to keep it simple.

Here's how it works in practice:

$50 is my zero point. For every tournament entry fee, every dollar over $0 requires an extra buy-in. For example, a $1 touranment requires (50+1) buy-ins, or $51. A $100 tournament requires (50+100) buy-ins, so (150BI X $100) = $15,000.

It should be obvious from the last example that playing at the highest levels requires a huge bankoll. The most expensive live tournaments in my city have an entry fee of $100, but there are tournaments available both live and online that cost thousands of dollars to enter.

I have seen a screenshoot of a PokerStars player who has over a million dollars on the site. I thought that that was crazy at first, but after I thought about for a minute, I realized that it made perfect sense. Playing at the highest levels, the variance is enormous, and you really do need to have a 7-figure bankroll to play with any confidence.

So now, when I talk about having, or not having, the bankroll to play a certain tournament, you'll know exactly what I mean. If I'm playing a $5 tournament, that means I have a bankroll of at least 50+5, or 55 buy-ins, or to put it another way, I must have a bankroll of at least $275, because 55BI X $5 = $275.

I hope that's clear enough. There is a lot of theory behind it, but having consolidated all of my tournament types into one conservatve formula, it's just simple multiplication:

(buy-ins +50 ) * (entry fee) = required bankroll, in dollars. If I stick to that, moving down as required, and moving up as I am able, I never have to worry about growing broke, and I'll know when the time is right to move up.