Poker Strategy – Comparing Poker to Stockmarkets

First off let me say before I begin that through this article I am going to wring this metaphor dry so if you're not one for a bit of creative logic stop reading now. For the rest of you I'm going to outline the benefits of analyzing your bankroll strategy and overall poker strategy as you would a stock portfolio.

Anyone can win in poker; in fact I would bet that the majority of people who have ever played have at least been in the money once. Winning in the short term is not and should not be the ultimate goal of a poker player, but to win at a constant rate, with winnings consistently higher than loses. Now that just sounds like common sense but it is amazing how little beginning players think about this fact completely before buying in to a game.

Consider a typical first time deposititor. Perhaps they've played a few home games and are familiar with the basic ins and outs. They deposit $ 60 and buy in for a $ 15 sit and go. They come second and win $ 20. Confidence boosted they book in for a $ 30 sit and go and lo and behold they squeeze out a win. Feeling sky high they buy in for $ 100 hoping to hold on for some big bucks, only to lose out and see their entitlement bankroll drain away. It does not matter if you win 99 times out of 100, if you bet your entire bankroll each time you will still lose it all in the end.

This is an extreme example to be sure but it is just to illustrate that you need to take in to account not only your average winning percentage, but also fluctuations and variations that can happen in a game with so many random elements.

Managing Risk

This is where the share markets come in. Just as in poker, many a broker has gone broke by putting all their eggs in one basket and purchasing too many shares in the same company. You may make a few gains but in the long run it's a risky tactic. That's why almost all traders practice what's called diversification, spreading their investments into lots of different companies so that a loss in any one investment has less effect on the overall value.

This is the key point that I think should be considered when developing your poker strategy. Shares and stocks are equivalent to individual games, and the value of the share is equivalent to the average value expected from the game (the chance of winning x amount won). That means that you should always diversify your poker games by only ever buying in to games that are a small fraction of your total bankroll. This way you get a lot more games (different shares) and spread the risk of losing any individual game.

Given that your average expected value from a game is positive, and you only buy in a sufficient low amount, you will always win in the long run. The more cautious you are. The lower percentage of your bankroll you can buy in, and conversely the riskier you are the larger you can buy in. This is exactly how Chris Ferguson described how me managed to claw his way from freerolls to over $ 140,000 to date ( http://www.fulltiltpoker.com/chris-ferguson-challenge ) simply by utilizing the correct risk management strategy.

Now I'm sure some of you out there are saying it's not very in the spirit of poker to play this way and I admit that I have often gone over my head for a buy-in. But I think it would benefit us all at the tables to change our thinking a bit, and see poker strategy from a long-range perspective.

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Source by James Carringdon