An Aggressive Approach to Bankroll Management Article

[Mr. Now]

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

[Troll_Inc]

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

[/ QUOTE ]

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.

[Mr. Now]

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.

[Ghazban]

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.

[Collin Moshman]

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

[Mr. Now]

Good analysis and well stated.

[Jetto2]

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 ).

[TT132]

AHA

[Jetto2]

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).

[pzhon]

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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.'

[/ QUOTE ]
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.

[ QUOTE ]

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.

[ QUOTE ]

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.

[/ QUOTE ]
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.