Understanding Stud Poker Investment Strategies

On the surface, we often play a poker game as a battle of wits and wagers. We take great pleasure in out-maneuvering our opponents with the best poker hands, but is winning really measured by the number of victims we claim?

Your Poker Hand: Your New Investment?

At its core, poker games are an experience of zero-sum investments. For one player to profit in draw poker, another player has to equally lose.

The strategies we employ to operate our poker empire are not unlike those used in the world of startups - only rather than create revenue, we are driven by a desire to win real money gambling in a poker game.

Borrowing from The World of Business

Imagine the poker hands we are dealt are equivalent to a new product line we’ve developed. If we want to scale into a profitable business, we need the capability to take our best products and replicate them over and over again. This requires capital, and a bit of patience for future success.

As the financier, our role is to optimize the capital by first and foremost investing in the strongest products, the softest markets, and the most profitable strategies-- or in this case strong starting hands, soft games, and poker study.

Secondly, we must manage the overall risk of the company. We have to ensure that we have enough capital to reach profitability without first going out of business due to over-extending.

So what do these business lessons have to teach our poker game? In short, PROPER BANKROLL MANAGEMENT can be the difference between having a seat in the big game vs having your nose pressed up against the glass in a betting round.

Poker Games and the Risk of Ruin

In order to determine how much money we need to comfortably operate, we must first be familiar with one key term: Risk of ruin.

Risk of ruin is a concept in gambling that calculates the probability of losing an entire bankroll. This can occur in two very specific ways.

Continually increasing your bankroll’s risk after wins, but not decreasing this risk after losses. Too often players will go on a rush, and then jump up in table stakes, only to have variance catch up with them. If pride prevents them from going back to whence they came, the fate of the gambler’s ruin is inevitable.
The second way to increase our risk of ruin is blending our bankroll with our living expenses. This is especially relevant early in one’s career, where the understanding of overhead is most critical. Just like any business, there are operating costs. In stud poker, this equates to our cost of living. Everything from rent to food to travel will need to be paid for, often by our bankroll.

So, how much money do we need to shrink our risk of ruin? It’s up for debate. Because live poker is slow, and therefore volatile, tools like variance calculators are less helpful than they would be in a more stable environment, like online poker.

Breaking Down Bankroll Strategies

Aggressive bankroll strategies would suggest 25 to 50 buy-ins, plus 6 months living expenses. More conservative ones would suggest 50 to 100 buy-ins, with a year’s living expense set aside.

Really this all depends on a person’s comfort with risk, as well as their ability to start from scratch should they go busto, which is always on the table. Make no mistake: many exit poker with nothing. In order for there to be winners, there must also be losers - and this is no free poker game.