Gambler’s ruin

Detail of card heart of queenGambler's ruin is a famous term that describes what happens when a player with a small bankroll meets another player with a much bigger capital or the casino itself. It isn't hard to figure that the player with little money is in trouble. But there's also a lot to learn from this circumstance. One thing that Gambler's ruin learns us is that even if the player with lesser bankroll is more skilled and therefore have a positive EV, he will still lose if his total capital doesn't manage to stay above a certain level.

Gambler's ruin is also closely associated with money management. A lousy money management will in most cases end with the player going broke – the reason is often in conjunction with the law of Gambler's ruin.

The foundation of money management lays upon that the stakes is being decreased if the funds are reduced. If this is neglected, all the remaining capital is at risk. Let's take an example:

You have $100 and playing a game with $10 bets there you expect to win 7 times out of 10. This will not hinder that you sometimes lose five games in a row. After five straight losses, your bankroll has halved to $50. Let's assume that you have the choice to switch to play about $5 per bet instead and with the same EV as before. Should you do that or continue as before (you have no reserve money if the remaining $50 are wasted and therefore cannot continue the game)?

You should absolutely change to $5 bets. The risk of Gambler's ruin will in this case be diminished (but not completely out of the question), and when your funds have reached $100 or more you can again play with $10 stakes. This method is essential concerning money management, and you should have this in mind playing poker.

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