An Aggressive Approach to Bankroll Management Article
 

The concensus is that bankroll management (money management) is overdone on 2+2. Reviewers tend to say this, in OP comments about most bankroll-related articles.

But you can’t really overdo articles on optimal bet sizing. Sizing bets relative to bankroll and edge is fundamental to success. Achieving the opposing goals of optimizing return while maintaining acceptable risk of ruin is essential to success long-term wagering success.

For these reasons I like seeing the article “An Aggressive Approach to Bankroll Management” in the magazine. In general the content is good. I do have some comments.

The article focuses on bankroll growth strategies and does not mention much about the downside Risk of Ruin aspect. RoR in fact is not mentioned at all.

An important aspect of RoR is that it can never be eliminated. Yes in theory you can never go broke with fixed fraction approaches but as a practical matter your BR can get lower than the minimum amount you need to sit down and play, leaving you effectively busted.

What you can do is manage to an acceptable RoR level. An excellent discussion on the “Acceptable Risk of Ruin” concept appears here:
http://www.traderscalm.com/rorhandiwork2.html

The other thing I comment on is the Value vs. Growth investing analogy in the article. These are equity investing approaches, not BR management concepts. Equity investors regardless of approach must size their per-equity positions on BR (read: RoR) considerations. I think the author uses ‘value’ and ‘growth’ in the article as proxies for ‘conservative’ and ‘aggressive’ BR management approaches. Some readers may find the value-vs-growth analogy an impediment to understanding the otherwise good content in this article.

The last item is Optimal F. Optimal F is a fixed-fraction betting method that optimizes bet size for net profit. As such it is an important BR approach to understand. It’s a much more aggressive approach than Kelly. Optimal f optimizes theoretical net profit but results in huge BR swings.

Optimal f Overview:
http://www.adaptrade.com/Articles/article-ffps.htm

The Definitive Work: Fundamentals of Money Management by Ralph Vince
The Book

Re: An Aggressive Approach to Bankroll Management Article
 

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The concensus is that bankroll management (money management) is overdone on 2+2.

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Please provide what 2+2's position on bankroll is.

Please provide 2-3 references to support your claim that 2+2's position is overdone.

Re: An Aggressive Approach to Bankroll Management Article
 

If you follow the magazine for a period of time, you notice the trend on articles and comments.

My observation is that 2+2 readers do not seem to respond with enthusiasm to BR articles generally.

This article, for example, has no previous comments about it.

I am not saying BR articles are overdone. I am saying the articles do not seem to be popular, even though BR is a huge and important topic.

Re: An Aggressive Approach to Bankroll Management Article
 

My unresearched opinion is that those who understand these topics already have little to comment on re: the articles and those who do not are generally not willing to go through the math to acheive said understanding. They would much rather accept a "X big bets" or "Y buyins" set-in-stone rule than understand where those figures came from.

Re: An Aggressive Approach to Bankroll Management Article
 

I really like this article. I would almost never invest anything close to 10% of my BR on one SNG, even with a fairly large perceived edge. This is because I gamble for over 90%+ of my living, and I place such negative value on losing all my assets that I'm willing to go pretty far to ensure that doesn't happen. And I don't think that that's necessarily irrational.

Anytime you base decisions that involve putting risk aversion into a number based purely on plugging numbers into an equation, you're not gonna get a prefect answer.

But you don't need a perfect answer to come up with an interesting result, and reading this article makes me want to reconsider my conservative BR style. All in all, a thought-provoking and certainly recommended article.

Best Regards,
Collin

Re: An Aggressive Approach to Bankroll Management Article
 

Good analysis and well stated.

Re: An Aggressive Approach to Bankroll Management Article
 

I think there is something missing in the formula. You use probability as a variable so you can't have an absolute answer but some think that tell that with this amount of BR you have 20%, 10%, 5% of chance to run out of money assuming the other factors are right.

French reader may read my post http://forumserver.twoplustwo.com/sh...umber=11064533
I'm not that a translation would be usefull because this is mostly a rewrite of an article about video poker ( http://www.blackjackforumonline.com/content/VPRoR.htm ).

Re: An Aggressive Approach to Bankroll Management Article
 

AHA

Re: An Aggressive Approach to Bankroll Management Article
 

I would like to know what my calculation gives with a true set of S&G data.

For each raw I need the buy-in, the prize structure, the number of players and all information to let me know if two S&G are different (Turbo,Room...) and or course the end position. It would be nice to have the end position even if not in the payed places to try to know what kind of distribution is. But this is not very important.

As every time the bigger the set is the more accurate the result will be (if my hypothesis are right of course).

Re: An Aggressive Approach to Bankroll Management Article
 

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The concensus is that bankroll management (money management) is overdone on 2+2. Reviewers tend to say this, in OP comments about most bankroll-related articles.'

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I tend to agree with Ghazban that the articles reach the choir, and not the people who are saying, "Tell me 10 buy-ins is plenty so I can skip levels," or, "Tell me 1000 BB is needed so I can blame my 500 BB downswing on luck." However, bankroll managment is simpler than the way it has been presented in articles here, and much has been said that is irrelevant or incorrect. There is still room for improvement.

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The article focuses on bankroll growth strategies and does not mention much about the downside Risk of Ruin aspect. RoR in fact is not mentioned at all.


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Risk of ruin depends on what you will do when you hti a down swing. When will you move down, and what would that do to your win rate?

The artificial ROR models do have some use. They tell you about the probability of downswings of various sizes. But they don't actually say much about your risk of ruin.

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The last item is Optimal F. Optimal F is a fixed-fraction betting method that optimizes bet size for net profit. As such it is an important BR approach to understand. It’s a much more aggressive approach than Kelly. Optimal f optimizes theoretical net profit but results in huge BR swings.

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My understanding is that optimal f is not much different from a fractional Kelly system, and that agrees with the article you cited.

Optimal f does not optimize expected profit. No bankroll management strategy does.

The article should have been shorter and simpler:

<ul type="square">Bankroll = c * SD^2 / WR, where c is the reciprocal of the Kelly fraction you use. I call c the comfort level. Most people are happy with a value of c between 2 (half Kelly) adn 4 (1/4 Kelly). The standard deviation for full single table tournaments is known to be about 1.7 buy-ins, so plug in various values to Bankroll = c * 1.7^2 / ROI. E.g., if you are aggressive and have a ROI of 30%, Bankroll = 2 * 2.89 / 0.3 ~ 19 buy-ins.[/list]This is simple, it is consistent between advantage gambles, and it take into account the variance conditional upon cashing, which the article did not. It does not introduce the irrelevant ITM percentage. The article's calculations also assume c=1, which is quite unpopular.

Why do people recommend 50 or 100 buy-ins for SNGs? First, some advice is used out of context. Expert win rates are lower in tougher games. A 6% ROI in $215 SNGs is fine, and someone who is working on the $5.50 SNGs should pay close attention to the advice from a player who is beating high stakes games. However, the number of buy-ins needed does not translate. A ROI of 30% means you need only 1/5 as many buy-ins to be as safe.

Second, some people want something different from a bankroll than a low risk of ruin. They want to be able to cover the worst downswing they have every heard of. If someone who does not have a track record of being a solid winner at a level reports losing 72 buy-ins, these players will say you now need 73, regardless of your skills or the level you are playing.

It may be interesting to some people to see that some of the same ideas show up in other fields such as finance. Football involves risk and reward, too, but football fans/players/coaches are among the least receptive to logic, and they have plenty of entrenched bad ideas such as punting on 4th and 2. The growth vs. value example was poor. It's a continuous tradeoff, not a dichotomy. I'd like to see better selection when reporting the common wisdom of other fields as something to emulate.

Re: An Aggressive Approach to Bankroll Management Article
 

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I would almost never invest anything close to 10% of my BR on one SNG, even with a fairly large perceived edge. This is because I gamble for over 90%+ of my living, and I place such negative value on losing all my assets that I'm willing to go pretty far to ensure that doesn't happen.

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Non sequitur. Your reason is part of the assumptions of the bankroll management models. Kelly's work assumes that going broke is infinitely bad. So, you need to have another reason to justify not ever buying in for

Let's suppose you normally toss coins for $10 with an edge of 1%. Let's suppose you feel adequately bankrolled with $5000, but you wouldn't with only $1000. How much of that $5000 would you be willing to bet as a 3:2 favorite? How much would you be happy to get in with AA against a random hand, let's say as a 6:1 favorite?

I don't see how to answer these consistently without using math, and the math says that the edge you have matters a lot.

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Anytime you base decisions that involve putting risk aversion into a number based purely on plugging numbers into an equation, you're not gonna get a prefect answer.


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That looks like an irrational distrust of mathematics. It's good to understand something so well that you can model it mathematically. Why would you trust the answer more if you fail to quantify something? I hope you are trying to say something else.

Re: An Aggressive Approach to Bankroll Management Article
 

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Anytime you base decisions that involve putting risk aversion into a number based purely on plugging numbers into an equation, you're not gonna get a prefect answer.


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That looks like an irrational distrust of mathematics. It's good to understand something so well that you can model it mathematically. Why would you trust the answer more if you fail to quantify something? I hope you are trying to say something else.

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I agree but most of the time and this the case in this article a formula come from no where with very few explanation so this is quite the same to assume that result is right than assuming the formula is right. In most case authors silently does hypothesis that are obvious in his personal case but may be false for others. The most common hypothesis is the normal distribution of results.

I don't understand how to manage a BR without speaking of RoR. Without this BR management is only gambling.

Whatever, if our RoR formula a right, if values we use in formula are right, if we perfectly manage our BR to have less than 1% of RoR, we still have 1% to run out of money [img]/images/graemlins/tongue.gif[/img]

Re: An Aggressive Approach to Bankroll Management Article
 

hi all,

it's pretty cool to see this topic in the magazine.

here is a post i made a while back on the topic, with some discussion that went on. the first post i made in the thread below was a little off, scroll down to the revision i made a few posts down. there is also some good discussion there from some folks overseas on using exact finish distributions to better understand the variance involved.

http://forumserver.twoplustwo.com/sh...umber=10403633

it's good to see in the article the author used finish distributions, as this gives a little bit more info than using just ROI &amp; ITM. anyway, in SnG practice, i ran into the a lot of limitations in using this. for one, it essentially forces you to play in sets rather than continuously. if you are 8-tabling or so you will often be playing across 2 buy-in levels, which sometimes makes it hard to adapt. this problem gets worse the more tables you add. also you need to set a floor for the BR (and buy-in level) so that you don't get stuck playing micro-limit sng's during a bad run.

of course the other catch 22 is not knowing your ROI for the levels in which you are taking a shot. with a large sample size at multiple limits, however, this is the best way to ramp up a small BR or to rebuild a BR up to a level after cashing out or sitting out for awhile.

Re: An Aggressive Approach to Bankroll Management Article
 

The article seems to recommend some bankroll fraction (f*=5% or 1/2 f* =~ 2%) for a 30% win rate in a 9 men SNG? But I'd think that a 30% win rate (ITM percentage) for a 9 man SNG is actually a losing proposition, with a ROI that cannot be higher than -15% to -20%?! So , bankroll recommendation for losing propositions?!? what am i missing here?

Re: An Aggressive Approach to Bankroll Management Article
 

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I'd think that a 30% win rate (ITM percentage) for a 9 man SNG is actually a losing proposition, with a ROI that cannot be higher than -15% to -20%?!

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No, the discussion is about a player with a 30% ROI. The ITM rate assumed in the article was 40%, above the 33% average.

<ul type="square">
For example, the person cashing 40% of the time over 1,500 games will cash in 600 games. Let's say they won 210, second place 238, and third place 152 times.[/list]

Re: An Aggressive Approach to Bankroll Management Article
 

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here is a post i made a while back on the topic, with some discussion that went on.

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Would you care to summarize what you think that discussion accomplished? I don't think it made the progress you think it made.

You mentioned,
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this is nowhere close to the suggested 100 buy-ins: definitely RoR has plenty to do with that.

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No, it doesn't. Risk of ruin is not a separate consideration. It's easy to translate a proportional guideline to a ROR value if you stay at a fixed level, e.g., Kelly corresponds to a ROR of about e^-2 ~ 14%, and half-Kelly is about e^-4 ~ 2%. You can't blame the the tremendous discrepancy on a rational consideration of ROR.

100 buy-ins is a figure used out of context. Similarly, it is grotesquely inaccurate for the SSNL FAQ to suggest that you should have $100 to play NL $0.01-$0.02 on PokerStars just because there is a $5 buy-in. This ignores the fact that it is much harder to lose a 250 BB buy-in than a 100 BB buy-in, and that most penny-ante players hate money so serious players' win rates are ridiculously high compared with other stake levels. When people apply the 20 buy-ins rule out of context, they sit out until grossly overbankrolled for soft games, and but play while dangerously underbankrolled for tough games.

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scroll down to the revision i made a few posts down.

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Was the revision particularly concise and accurate? How does it compare with c * SD^2/ROI?

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there is also some good discussion there from some folks overseas on using exact finish distributions to better understand the variance involved.

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Do you mean the comment that the exact finish distribution has a very small effect? Paxinor wrote, "the difference is really really small so it won't matter." So, why bring it up?

With very skewed distributions, like +EV video poker with a large jackpot, the normal approximation is not good. You need a slightly smaller bankroll when the positive tail is thick, such as when you can win a jackpot. You need a slightly larger bankroll when the negative tail is thick, such as when you may have to pay out a jackpot. This isn't particularly relevant to SNGs.

To worry you that the recommended bankroll level might be too high by a few percent, you should have astoundingly accurate estimates elsewhere, particularly of your ROI (which should be known more accurately than 1%) and know exactly which Kelly fraction you are using (within a few percent). Others are worrying about getting the right bankroll within a factor of 2.

You also wrote,
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yes of course, roi is not constant. you don't need a more complex formula.

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You need to think about that more. Of course you need a more complicated formula when the ROI is level-dependent. In general, this says that you should play at levels where the fractional Kelly system you prefer would say that you are overbankrolled.

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it's good to see in the article the author used finish distributions, as this gives a little bit more info than using just ROI &amp; ITM.

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The article failed to use the finish distribution properly, as mentioned in the note at the bottom. So, what was the point?

You get very little from using the finish distribution, ROI, and ITM that you don't get from the far simpler ROI + a simple estimate of 1.7 buy-ins for the standard deviation. The latter gives you a simple, applicable formula. The former is an invitation to make many types of errors.

Some people find complicated formulas and page-filling tables of values aesthetically pleasing. As a mathematician and theoretician, I don't, and I maintain that you aren't getting an increase in accuracy from the additional factors you want to include that can justify a huge increase in complexity over Kelly's c * SD^2/WR.

Re: An Aggressive Approach to Bankroll Management Article
 

Optimal f maximizes theoretical return without regard to theoretical downstring magnitude (drawdown).

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Risk of ruin depends on what you will do when you hti a down swing. When will you move down, and what would that do to your win rate?


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That is not exactly how I think about it. If you can handle huge swings, go 100% Optimal f and optimize for max theoretical return without regard to theoretical downswing magnitude. Otherwise scale back to 1/2 Kelly etc. There is the emotional impact of drawdown to consider per individual.

RoR is a impossible to get rid of and must be managed. For Mr. Now, what he is likely to do during a downswing has EVERYTHING to do with defining an acceptable RoR and nothing to do with RoR itself per se.

'Acceptable RoR' is a great concept and easy (and essential) to put into practice.

That excellent discussion on the “Acceptable Risk of Ruin” concept appears here:
http://www.traderscalm.com/rorhandiwork2.html

Re: An Aggressive Approach to Bankroll Management Article
 

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That excellent discussion on the “Acceptable Risk of Ruin” concept appears here:


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Actually, that's horrible. Are you in any way associated with that site?

First, "The Calm Trader" is introduced as someone who never has substantial downswings, even 10%, and has been more than tripling his money each year. Are we supposed to believe this? It sounds like they are slowly unveiling a get-rich-quick scheme, preying on people who want to believe they can get ridiculous rates of return.

Then they discuss downswings as if the only way you can have a downswing is to lose continuously. Most 100 BB downswings do not come from losing a few hundred hands in a row. They come from losing more than expected (and winning less than expected) over stretches of thousands of hands which include many wins. No real, useful calculations are included, but there are some misleading tables.

Then they introduce the idea of hedging as "mindblowing." Come on. In a 15 minute introduction to the theory of investing, I get to hedging. It shouldn't be new to anyone who is serious... but maybe some get-rich-quick victims would be impressed by it. Is this site's goal to collect potential scam victims?

Finally, the guy who is supposed to be making 11% per month thanks the interviewer for his insights. I think something got mixed up. What better indication is there of high quality, unbiased journalism?

The article was garbage. It had almost nothing to do with having an "Acceptable Risk of Ruin," and I have to wonder why you recommended it.

Re: An Aggressive Approach to Bankroll Management Article
 

I'm sorry to hear you get nothing from the article, assume Mr. Now is somehow associated with the site, and otherwise find the article less than useless.

Apparently the article does not validate your beliefs about downswings.

Go in peace.







Go in peace.

Re: An Aggressive Approach to Bankroll Management Article
 

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I'm sorry to hear you get nothing from the article, assume Mr. Now is somehow associated with the site, and otherwise find the article less than useless.

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Well, I'm sorry you linked the article twice, and wasted my time. I hope my summary saved other people from taking that article seriously.

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Apparently the article does not validate your beliefs about downswings.

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Excuse me? The article says things that are flat wrong, and you suggest I am rejecting it only because I have some questionable beliefs about downwings? I have no idea which beliefs you are talking about. Do you not understand that the article is wrong, misleading, and unrelated to what you claimed it was? Did you even read it?

The article mentions coinflips which pay off more than the fair value. That's a standard toy problem. Then it claims the risk of ruin depends only on the amount you can lose and the probability that you lose, and that the only way to go broke is to lose every single time. That is wrong and ridiculous. I'm not making this up or taking it out of context. Here is a direct quote:

<ul type="square">That means that if you bet $10 a time, that would give you ten bets before you lost all your $100. And the risk of ruin (that is losing all your money), betting $10 a time would be about 1 in a thousand.[/list]Obviously, the risk of ruin if you are getting paid 2:1 is different from if you are paid 3:1, and if you lose 9 bets out of 10, you aren't home free.

Don't you think you should apologize for recommending that load of garbage twice?

Re: An Aggressive Approach to Bankroll Management Article
 

Hi pzhon,

Thanks for your harsh, personal, vituperative criticism. Yes I do read the article and no, I have no plans to apologize for posting a link. Thanks for asking though.

The linked-to article does not claim that 'the only way you can go broke is by losing every time'. It suggests that consecutive running losses is the worst-case, fastest way to go broke. And the scenario to manage to.

It suggests that bet size is best informed by the personal, acceptable RoR level.

Of course there are much slower ways to go broke than a series of consecutive losses. For example bad poker players can and do use BR management techniques to control risk. At the same time, they play with a negative edge. Over time, even without transaction costs, these players slowly go broke. Good bet sizing does not make a -EV method +EV. But good bet sizing delays the inevitable for -EV approaches and can help optimize +EV approaches.

You are eager to discuss these points, perhaps to "waste" your "time".

I have no plans to argue these points with you further. So, thank you-- and goodbye.

http://www.shirt24.ee/pildid/sloganid/185ignore.jpg

Re: An Aggressive Approach to Bankroll Management Article
 

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Hi pzhon,

Thanks for your harsh, personal, vituperative criticism. Yes I do read the article and no, I have no plans to apologize for posting a link. Thanks for asking though.


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You are welcome to the constructive criticism I have posted. I said nothing about you. I pointed out that the article you repeatedly recommended, and called excellent, was on the level of an get-rich-quick informercial, and was not even relevant to what you said it was. I also pointed out that you misrepresented optimal f systems.

You grossly mischaracterized my comments. Since you whined about personal criticism, here is some to clarify: <font color="blue">Your actions reveal you to be a muddled poser who is frequently wrong, but who is unwilling to admit he is wrong on the simplest matters in the face of clear evidence, even when granted several opportunities to retract his misstatements gracefully. Do you have any idea why on thread after thread, people worth listening to respond to you with, "WTF? Did you miss the obvious, or can you just not communicate?" If you think the article you twice recommended was great, then you are a child, and you not only shouldn't waste adults' time with this, someone else should handle your money.</font> Now, that was harsh, personal, somewhat vituperative criticism. Do you see the difference? <font color="blue">Then you are a hypocrite as well as a bore and a gull for not ignoring me when you said others should.</font> That was personal, too. <font color="blue">You have insulted our intelligence by saying a get-rich-quick website is excellent, and that disagreement with the errors in that garbage must be based on personal bias.</font> That wasn't personal. Disagreeing with your statements isn't personal. Pointing out that you said something wrong or unbelievable isn't personal. Those are not about you, they are about individual actions, which are public and can be analyzed objectively. Saying that you must be incompetent to believe that article was excellent is personal, since it speculates about you and expresses a judgement about you.

Ok, with that clarified, please reread what I posted before this, and point to any harsh personal criticism. Perhaps you are confusing what I said with feedback you have received elsewhere. I did criticize the article, though not unduly harshly, and I pointed out factual errors, but I said nothing about you or your overall behavior.

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The linked-to article does not claim that 'the only way you can go broke is by losing every time'.

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It did, in the part I quoted. It said the ROR with 10 bets and a 1/2 chance to lose is 1/2^10, "about 1/1000." The actual ROR is over 8 times as high given the article's assumption that you get paid 2:1. The statement that, "If you were happy with a risk of ruin of 1 in a thousand, you could afford to bet up to 10$ a trade (coin toss)," is simply wrong, and there are plenty of other quantitative and qualitative flaws in that article. It even uses the same ridiculous rate of return per month as the infomercials.

You still haven't explained why you recommended that piece of crap repeatedly. Do you recognize it as worthless, but have a stake in the site, which presumably sells investment schemes to greedy dupes? Did you post it accidentally? Or did/does it honestly look good to you? Regardless, posting it repeatedly and calling it excellent was an insult to our intelligence, and you should apologize.

Re: An Aggressive Approach to Bankroll Management Article
 

The article sucks, but more importantly, the OP used the word vituperative and for that reason alone, he loses.