Get serious about measuring your performance: Sharpe Ratio

[CTKid]

In finance, the Sharpe Ratio can be used to measure the performance of an investment strategy. It is defined as the return generated by your investment(s) above the riskless rate (say the 30yr treasury bond) divided by the standard deviation of your investment(s).

This measure is useful because it is risk-adjusted; a riskier asset must perform better than a less risky one to have the same Sharpe ratio.

After reviewing this thread, its hard to ignore how important both increasing your winrate and decreasing your standard deviation are to anyone who relies on poker for a "steady" income. Long losing or even break even streaks can be hell both financially and psychologically.

In measuring your poker success, you should start thinking not only in terms of winrates in BB/100, but also in terms of your poker Sharpe Ratio, which is:

Poker Sharpe Ratio = Winrate in BB/100 / Standard deviation in BB/100

Interestingly, a very good hedge fund might have a Sharpe ratio of 10. In NL poker, the best one might hope for is probably around 0.2.