Risk of Ruin and Bankroll Management

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A lot of players have some difficulty with bankroll management in the long term. When handling a short term bankroll, one that you’re not using as a primary source of income, it’s not life changing to lose the roll. Many times, you’ll be playing a lot shorter than your average player would be comfortable with, and the idea of “busting” isn’t an imminent threat to you. When you make the transition from casual player to professional, however, your bankroll becomes your way of living. Losing this bankroll can now be potentially ruin you, which is where the term “risk of ruin” comes into our poker lexicon and gives us a new perspective on understanding bankroll management.

We use our bankroll in different portions of the total roll; sometimes being careful to never exceed 1% of the total roll in a given game, other times wildly flinging the entire thing into a game that we depict to be incredibly juicy, by our standards. The question is, when we make these choices, and divide our bankroll into certain divisions, what is our risk that, eventually, we will bust our bankroll and be “ruined” or broke? Understanding risk of ruin can be an effective way to manage a bankroll while allowing yourself to take shots at bigger games, by understanding the potential to go broke quicker based on the amount of risk you take on.

Let’s take a look at a normal bankroll and the possible ways we can utilize it. Our starting capital in this example will be $1,000. We like to play heads up, so we generally play online heads up, at the $25 tables, and we’ll play until we either bust or double up. Given this “win or lose” mentality about our play, we see that, in our roll, we have 20 buy-in’s to the given stakes before we will be completely busted, if we continue to play and lose at those stakes for a set period of time. The question is, from the point that we begin the bankroll, ($1,000) what is our risk of going broke if we play 20 tournaments? Very simply, we need to look at the odds of cashing (in this case, winning) or losing.

Anatomy of a Bankroll

We’ll assume, to begin our look into this subject, that you’re an equally adept player compared to your opponent. So, we’ll give the probability of winning .5, and losing .5. If we run the scenario 20 times, assuming we have to lose all 20 times to be “ruined” and go broke, the odds of ruin are 1/2^20, or 1/1048576. This is an incredibly low number, in case you’re wondering, so even with a simple 20 buy-in bankroll, you can put in 20 sessions over the course of a month and not put your bankroll completely at risk. These seems like simple logic, but many players allow themselves to bend this rule. Let’s say that, with this bankroll of $1,000, you see a juicy game at the $500 stakes with a guy you’ve played with before; and beaten significantly. You assume that, if the two of you play heads up and play until one or the other goes broke, you’ll end up the victor 60% of the time instead of your normal 50%. The question is, does the increased odds of winning this heads up match make it worth risking our entire bankroll in one shot? It depends on a few factors, but let’s look at the simple math. We take our 60% shot and run it 2 times, giving us a 16% chance of going broke if we play the match twice.

Now, if this 60% equity situation had arose in say, a $100 game instead of a $500 game, our risk of ruin would be a lot more acceptable to take a shot than the 16% chance of going broke at the $500 game. That’s thing about busting your bankroll; you can’t go negative in a bankroll unless you have backing or another source of income. When relying on your roll as a source of income, you cannot afford situations that allow you to go broke unless you absolutely have to.

Ruin In Action

An example of bad risk of ruin management is Jean Robert-Bellande, a player I give a lot of respect to as a risk taker, but as a bankroll manager, I have to say, he takes some of the wildest shots I’ve ever seen a poker player take in my lifetime. With a 15k bankroll, he sat in a 400-800 limit (with straddle mandatory) 2-7 triple draw, badugi, and badeucy game. He had less than 20 big bets for the game, yet because he felt he had an edge in the badugi and badeucy sections of the game, he put his bankroll on the line against players that had no problem playing that game with an expecting swing of 100k. Even if his expected edge in the game gave him a 70% chance of doubling his initial buy-in, because of how short he came in to begin with, two bad orbits could break a bankroll that has the potential to keep him playing for a lifetime.

Self-sustainability is a vital asset for your bankroll, and finding that point that you can afford 100 buy-ins for your chosen tournament buy-in, or 50 buy-ins for your chosen cash game, will allow you to play your best game, with the highest possibility of profit, without risking more than 1-2% of your bankroll at any given time. When you do want to take a shot, you can do so at a level that doesn’t risk a large portion of your bankroll (no more than 5-10%) and allows you to try to make a score that moves you up in stakes ($10 to $25 tournaments, or .5/1 to 1/2 NLHE) without forcing you to step down or quit completely if the shot doesn’t go well.

Keeping in mind the potential for ruin when you step up in stakes and the odds of going broke when you do increase your stake seems like a common sense topic. But, so many amateur players make the transition to a poker professional without grasping the concept of ruin, and before long, they take a big shot and find themselves busted and grasping for straws. Stay aware of your ruin potential, and you’ll never have to worry about finding yourself busted and out of the game.

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