We want you to play responsibly so before you pick a format and decide your bankroll strategy, learn how much variance a format has.
If you are quite new to poker you have probably followed someone else’s advice on bankroll management, that is if you have X budget to play, what stakes can you play safely without much worry about going broke?
If you have a bankroll management strategy that is a lot more than many players and it is valuable to start your poker career following disciplined rules, even if the system is not perfect. You can take our advice on what stakes to play but it is probably better to learn about variance and how it impacts your bankroll.
Variance is simply how much luck is involved in a poker format. What makes poker unique is that it is a game of skill with a significant luck component. A bad player can beat a professional the first time they play and a good winning player has to get used to losing even when they play well. The more variance a format has, the bigger your bankroll should be, because even if you do everything right you can go on a long losing streak.
There are free poker variance calculators online that show you how much luck you can expect, we like the ones at PrimeDope. You can input your stakes, the rake, the format and your expected win rate and it will simulate how wild variance can get. Let’s walk through an example to give you an idea what we mean.
In this example we are doing a simulation for $11 MTTs with 100 runners and 15 places get paid. We have used a big sample of 2,000 tournaments (you need a big sample to get reliable results) and we estimate our ROI is 15%. ROI is the average return you make from a tournament, if you are new to poker you won’t have any idea yet what it is. We have done 10,000 simulations, so the software replayed this scenario 10,000 times to give a reliable indicator of the averages.
How good or bad can it get?
The first thing it shows us is a visual distribution of the best and worst results over the 10,000 simulations. Starting on the left hand side you can see we drop below 0 meaning we lose money, but that is only a small percentage of the time. At the other end is when we ‘run like God’ and win big over that 2,000 game sample.
The next thing it shows us is 20 random samples from the 10,000 simulations. This is to show you how different the best and worst 2,000 game runs look, as well as showing you what the upswings and downswings within each sample look like. In this example that top bar shows us winning $10,354 in our best sample and losing $2,841 in the worst. You can also look at how good or bad individual peaks and troughs get in the sample, for example in the losing sample we were actually down $3,061 at one point.
Finally, we have a summary of the key findings from the data. Here we can see that on average we can expect to make $3,282 over 2,000 games but we have a standard deviation of $1,720. Standard deviation is how wildly you can deviate from the average result. This is a high standard deviation it is almost half of the average winnings.
The last statistic shows us that over 2,000 games we can sometimes expect to go on a $1,525 downswing, which is 138 buy-ins. This is an extreme example but it does happen and if you have a long enough poker career you will go through something like this at least once. We hope this lesson here is not that poker is scary but instead that you need a big bankroll to cushion the blows in tournament poker. If you had a 200 buy-in bankroll, which a lot of people would advocate for tournaments, you would have survived this downswing.
This is just one quick ad-hoc example of how to estimate variance in one type of format. What you should do is play around with a calculator like PrimeDope regularly to get to grips with variance, because a lot of otherwise talented players have gone broke because they didn’t respect it. Different formats have different bankroll requirements because they have more or less variance, for example cash games don’t require anywhere as strict bankroll guidelines.
Stay tuned to PokerStrategy.com as we are going to give you more lessons on understanding variance responsibly.