Bankroll Management III - The 5% Method

OK, so I lied a little bit. I'm going to be doing these next two posts out of order, because I'm not writing this from home and don't have access to my PokerOffice database. So instead of looking at my numbers and trying to determine what bankroll I need based on Malmuth's formula, I'll be looking at a different and much simpler method of bankroll management. This method is not based in mathematics, does not have a formula, and is much easier to understand. You won't need to buy a book and read up on theory to understand this one.

The method is what I'll call The 5% Method, and is the method of bankroll management that supposedly helped Chris "Jesus" Ferguson turn $1 into $20,000 playing online poker. (I actually used this method and no other bankroll management to turn $25 into close to $600--which I subsequently had to use to pay credit card bills, doh!--over the course of a year. I have no proof though, so you'll just have to believe me.) The main idea here is that you never have more than 5% of your total bankroll on the table at any one time. Additionally, if you double the 5% you sit down with at the table, you then leave the table with your profits and buy back into another game with only a 5% stake. This way, even when you get your money in preflop with AA and lose to the 72o caller, you can only lose so much. Only 5% of your bankroll can be lost to the worst of beats. Additionally, if you are buying in with only 5% of your bankroll, as long as you are willing to move down in limits if the going gets rough you should NEVER manage to go broke.

Now, this is a very easy concept to understand. However, my proposed solution is to use Malmuth's formula to determine the bankroll I need to play at a given limit, and then use Chris Ferguson's method to determine the exact amount I will buy in with at any given table. This way I will be able to play at stakes appropriate for my bankroll, while at the same time ensuring that my bankroll never takes a huge slide even when I get hit with a terrible beat. By combining these two methods, I should be able to keep my poker money intact for as long as humanly possible while playing at the correct limits to allow me to win as much as possible.

Now, next time I promise I'll be introducing PokerOffice and looking at some of my own numbers with Malmuth's formula. Then we'll take a look at money management as it can be applied to horse betting. I promise we're eventually going to get to gambling and taking a look at my results for the project, but I want to give everyone a chance to understand exactly where I'm coming from before I start making bets.

Until then, happy gambling.