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Gaming Guru

 

The Myth of Money Management

9 January 2000

Go into any bookstore or internet site that sells books on gambling, pick any gambling book off the shelf, and the odds are you'll find a chapter or section about so-called "money management." Not infrequently, you will see claims that money management is the secret to successful play in the casino. The author will go on to describe various betting progressions, win goals and stop loss methods that are supposed to put more money in your pocket. If you sit at the tables in the casinos and listen to the small talk from players, dealers and even pit crew, the subject will often turn to money management and someone will say it is the key to winning. Don't believe any of this stuff for a minute.

There are a variety of common myths that we see and hear. Here are some of the most common ones.

I'm betting with the casino's money. This one is often used to justify betting up into a winning streak. The punter figures that after a win, the money he is betting is the casino's money and not his own. Huh? Once the money travels over to my side of the table, it isn't the casino's money, it's my money. Consider the reverse. Suppose a player sits down at the table and buys in for $100. A few plays later, he's down to $50 and the other $50 is in the chip tray. Now he wants to get up and leave. Does anyone believe that the casino will give him back "his" money? Of course not. It isn't "his" money any longer. It belongs to the casino. The same principle applies when the money moves over to the player's side of the table.

Use a good betting progression if you want to win. It seems that almost every player has some sort of betting progression he or she uses at the table. Sometimes, as in the above example, it has the player betting more after a win, commonly called a "positive" progression, and sometimes it has the player betting more after a loss, which is often termed a "negative" progression. Either way, the final result is the casino will get more of the player's money. Either way, a progression assumes that the past performance of the dice, wheel or cards is a predictor of future performance. It just isn't so. Your chance of winning or losing the next hand has absolutely nothing to do with what happened the last hand, especially in craps and roulette. Unlike dice or wheels, cards do have memory, but even in card games, any correlation that may exist between the results of the last hand and the results of the next hand is so small it is for all practical purposes as nonexistent as it is in craps or roulette. It doesn't matter if the dice passed for the last twenty hands or if red showed up the last fifteen hands on the wheel. The odds of a win or a loss on the next hand are exactly the same as they were on the very first hand of the streak. The house has a built-in advantage on every single hand.

In the end, the player's return is going to be the expected value of the hand times the amount of money bet. For example, the pass line in craps will return to the player 98.59% of all the money he bets. The more money a player puts on the line, the more money that player will lose. That's it. If a player uses a betting progression that results in the player putting more money on the table, then the player will simply lose more money faster than he would have if he stuck to his original betting unit.

Set a win goal for yourself and when you reach it, quit playing. Sounds good, doesn't it? If you intend to play only once in your lifetime, it might even make some sense. But you're not going to play only once in your life, are you? Unless you are an advantage player, such as a card counter, you are playing with a negative expectation. Odds are, whatever winnings you put into your pocket today, you will give back tomorrow, or the next time you visit the casino. A win goal will not alter this in any way. What it can do is slow down your play, which may give a player the illusion that the win goal has some positive effect. If setting win goals enhances your enjoyment at the tables and gives you more days to play, then go ahead and use them. But don't be deluded into thinking a win goal will make you a winning player in the long run. It will not. If you are an advantage player, it can even hurt you in the long run. After all, if you are truly playing with an advantage, you want to get in as many hands as possible. Win goals simply mean you are playing fewer hands, which ultimately means you will win less money.

Use a stop loss. Here, the theory seems to be that when things are going bad at a table, get out once you have reached some pre-determined loss. Like a win goal, all this does is slow down your play. For the average player, this is a good thing, since you are constantly at a disadvantage with the house and the more time you spend at the tables or the machines, the more money you will lose. However, like a win goal, it puts not one red cent more into your pocket. Again, for an advantage player, slowing down your play simply means you will win less in the long run. There are those who argue that a big loss can have a psychological affect on a player and cause him or her to use poor judgment, betting more money than the player's bankroll can sustain, making poor playing decisions or playing in poor games, all in an attempt to recoup the large loss. If you know yourself well enough to know this could happen, then a stop loss might make some sense. If a person considers himself to be a true advantage player and cannot exercise the necessary self-control to avoid this, that person may be well served to find some other way to earn money. Gambling is not for him.

In the end, the kinds of money management schemes described above cannot cause a player to win money. The very best they can do is slow down the player's rate of loss. In the case of betting progressions, they will actually accelerate the loss rate. There are forms of money management that are valuable to advantage players, such as sizing a bankroll based on optimal betting methods and risk of ruin. For those folks who use the casinos as a form of entertainment and are willing to accept the house's advantage over them, the money management described in most gambling books will do nothing to add to their bottom line. For the typical gambler, the bottom line is you will lose your money. That is the price of the entertainment you get in the casino and it may well be worth the cost. Just remember that the typical money management schemes won't change that.

Bootlegger
Bootlegger is a frequent contributor to various gaming web pages on the
worldwide web. His intelligent, insightful opinions and analyses have gained him quite a reputation in cyberspace as an expert who knows the games and understands the gambler.
Bootlegger
Bootlegger is a frequent contributor to various gaming web pages on the
worldwide web. His intelligent, insightful opinions and analyses have gained him quite a reputation in cyberspace as an expert who knows the games and understands the gambler.