A Valentine’s Day Lesson, from anonymous

February 15, 2012 |

I was playing Texas Hold'em Poker online yesterday. For about an hour, I had some very good wins. Then my wife came in from outside, and we had the Valentine's greetings. It was for less than half a minute. During this time, someone called all-in. When I discovered, the software followed the bet for me when my response was timed out. So I lost it all.

Things of this nature happen more often and more easily than we think. This is just another alarm for me to take the lesson seriously.

Jeff Watson writes:

The real lesson here is to not play NL poker games. The risk of ruin in any NL game approaches 100%. Limit poker is much better for your longevity and bankroll….provided you are a good enough player to have an edge. If you don't have an edge, stay away from the game. This applies to any game, market, sport, or activity that is competitive in nature and has a win/lose outcome.

John Netto comments:

Jeff, I have a different perspective in the limit vs. no-limit game discussion. As you hit on, much like trading, issues like bankroll, rake, skill of opponents, and ability to extract the greatest amount of expected value all play a roll. When discussing the risk of ruin in a No Limit game, it is important to qualify one game vs. a career. Limit hold'em can impede the ability to extract bankroll from weaker players who will egregiously overpay to chase draws or call after they have been beat. Over the life of a professional speculator, forsaking this volatility can come at a cost of giving up even greater alpha (we are trying to push the efficient frontier up and left, not down and right)…

In fact, playing no-limit tournament poker vs. no limit cash games is a different discussion all together, considering the variance as a professional tournament player vs cash game player (almost akin to being long gamma vs short gamma strategies in the market).

The reason why I am a professional sports bettor, former cash game no-limit poker player, and commodities trader is the ability to put myself into asymmetrical bets and judiciously control my bankroll. In fact, as unfortunate Leo's misfortune was, operational risk is a part of trading and poker. Many poker sites will give the option to check or uncheck the "call" button. There are benefits and drawbacks to both situations.

Sam Marx writes:

Can you imagine the damage a Flash-Crash would do if it occurred on an Option Expiration Day.

The previous Flash-Crash caused damage but much of it was later straightened out. But on an Option Expiration Day the damage might be insoluble

Ralph Vince writes:

On a similar note, given this creeping-up market of recent weeks, Prechter's prediction (which, I am not discounting one speck) I was thinking this morning how the 2008 crash closely correlated with Obama's imminent election (please, I am not arguing political idealogy here. I do not care one joy who is in charge of the Magic Kingdom and it means nothing to me at all).

Rather, given the landscape of the political backdrop here (and making the giant assumption that a large part of the drop of 08, planet-wide, was a consequence of Obama's imminent ascent) should I be en guarde for perhaps a replay of this into the Summer? Does anyone concur to a recent complacency regarding a rapid, precipitous drop similar (or worse) than '08 ?

Enjoy the etouffee,

Ralph Vince

Stefan Jovanovich adds:

These Presidents did not lose reelection during a war, but they did choose not to run again: Polk (the Treaty of Guadalupe-Hidalgo was signed in February and the last troops left Mexico in August 1848 but Polk had already announced that he would not stand for reelection), Johnson (Lyndon, not Andrew) and Truman. Eddy's Mom has the 30 months and out rule; if a war lasts more than 30 months, the incumbent President is in trouble. It seems to apply. The military winners have been Jefferson (Franco-American naval war), Madison (1812), McKinley (Spanish-American), Eisenhower (Korea) - none of whom had a war last more than 2 years while they were in office. That leaves Lincoln (who only won because of the votes of the Union soldiers themselves), Roosevelt (by 1944 everyone in America knew it was Roosevelt's last term and the Republicans invented the Michael Dukakis of their history - Dewey) and Bush I (which I think has to be discarded because 3+ person races throw out all the rules - vide 1860 and 1912). The only winner who has clearly violated the 30-month rule was Bush II. My explanation for that anomaly is that the Democrats lost because John Kerry was still trying to prove to himself and the world that he really earned all those medals he put in for. (Of all the issues on which to base a challenge, why would anyone choose: Incumbent reservist draft dodger vs. fake war hero?)

That leaves Obama. I agree with Prechter in his thesis about social mood; the arrow of causation runs in the opposite direction. The markets will tell us the fate of the President. So, if Ralph is right, elephants will be dancing in the streets in November.

Comments

6 Comments so far

Andre Wallin on February 15, 2012 10:46 am
I am highly suspicious of people who have a linked in profile… why does a professional sports bettor need one of those?
Ed on February 15, 2012 12:48 pm
Jeff, can’t a no-limit player manage the bankroll by simply limiting the amount they take to the game.
Andre Wallin on February 15, 2012 10:02 pm
people who have linkedin profiles are hoodoos
Jeff Watson on February 16, 2012 8:37 pm
@Ed, sure they can. But do the math and show me where the gambler’s ruin doesn’t approach 100% in NL games. Varying the amount taken to the game can be good money management, but remember that playing a NL game is like a rodeo rider riding the bull Bodacious. http://www.youtube.com/watch?v=SraIAmCL_ok.Sure, you could beat Bodacious http://en.wikipedia.org/wiki/Bodacious_%28bull%29 if you were real lucky, but why even court such danger? Maybe I’m just chicken but I have an appreciation for staying in business and would much rather be riding http://www.youtube.com/watch?v=wd60k5NnIbg something that was not going to kill me. I’m not very brave when it comes to markets, and while my cowardice probably has have limited my potential returns, it has also allowed me to stay in the game this long.
Ed on February 18, 2012 10:00 pm
I like this Jeff thank you for the input. Let me quote you:

“But do the math and show me where the gambler’s ruin doesn’t approach 100% in NL games”

Just a few observations:

5 players starting with equal bankroll creates a potential 1 to 5 risk to reward ratio. Manage the bankroll by what you take to the table (vs. max risk per hand) and it seems the most skilled players should still pull ahead.

So my uninformed view of how to position to succeed in this would be:

1.) View each night’s play as the trade, rather than each hand as the trade.

2.) take only that fraction of the bankroll to the game that one would be willing to lose on one trade (hand) in limit games.

The weakness of this approach is to play seriously and have a good amount to play with at the table, the total bankroll would need to be quite large. So perhaps this is merely an observation that there is a great advantage to having the largest bankroll.

The ability to create pressure situations in others when you are under little pressure would seem to almost inevitably grind down opposition (given other skills existed).

I would guess that is the key to winning over the long term in NL play.

…No wonder the prop desks at “too big to fail” banks could print money so consistently!
steve on February 20, 2012 9:30 pm
to the editor I do not understand why my previous comments were not published. i would hope that they were overlooked rather than censored.

that said in poker only in cash games with no rake is it a zero sum game. In casinos there is the rake the toke and the bad beat. this is a slippery hill to climb and reduces the return of money.

Playing NL case is a very tricky beast. The blinds kill you if you do not play hands. It is the gambliest of a poker games. i prefer others.

Second cash is truly king and you are correct. You can muscle a table around if you have alot of money. Since games are table stakes, properly navigated it is a distinct advantage. there is no more chilling words than all-in by the big stack. They are really table captains. Structured games are more strategic and statistical. a 20-40 is a very good game. you need around 2000 to 4000 to play the game right.

The major problem with NL of course one bad play wipes out a whole evening of work. My advice is stay away unlies you are very knowledgable in all nuances and know the statistics of winning. It is truly harder and riskier to play than any other poker game.

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