Section: Advice > Money Management

Money Honey - The First and Last Word on Money Management
by Peter Ruchman

"So, oft in theologic wars The disputants, I ween, Rail on in utter ignorance Of what each other mean And prate about an elephant Not one of them have seen!" -The Blind Men and The Elephant, by John G. Saxe

Part One - The Best Things In Life Are Free

What is this thing called money management? Wise "beards" in the casino mumble thy name. Wiseacres crack sarcastic remarks after losers make vague references. Wise experienced authors pay homage in their books, lecturing; "All you need is... money management."

It's all so confusing. Following long explanations of rules, strategies, expectations, psychology, in every game involving chance and opportunity, it all seems to come down to: money management. It is a rare tome indeed that offers a practical, hands-on approach to demystify and simplify this all-powerful creature.

The literature of gambling contains published papers, books, and journals containing the pros and cons of a garden variety of systems and methods, many chock full of upper-level mathematical formulas meaningful only to other abstract mathematicians and pure theorists. But to the person interested in learning what will actually work, who is usually unfamiliar with the algorithms and nomenclature of calculus and abstract philosophy, there isn't a great deal out there.

And as a counter reaction, there have been authors who simply believe in debunking the need for any money management at all, claiming professional gamblers ping-pong between fortune and famine on a routine basis, and that is to be expected. But how does this help the majority of people who are truly concerned with elevating their knowledge, experience and playing skills? They don't possess either the big bankrolls or the desire to become professionals. They simply want to better their chances and thus their play, and increase their bankrolls along the way.

Money management: In practical plain English, it means survival skills; owning a combination betting plan, loss or stop limit along with a profit limit (how much is enough?), and a discipline to adhere to these self-imposed limits. Through the years, strategies have come and gone. A few remain alive.

And Your Bird Can Sing

Let's take a look at a few of the more popular: You just might find yourself in this grab bag.

The Martingale and the Great Martingale Systems: These related methods of play are among the world's oldest betting strategies. The concept is that when you lose a bet, you double or increase the next bet until you win all your original money back plus one unit profit. In the Great Martingale, you double your previous losing bet and add a unit each time. For example: Following a $5 loss, a $10 bet plus an additional $5 is bet. If that loses, the bet is doubled and another $5 is added to make $35. If you lose five bets in a row, and finally win your sixth, you will have lost $285, won $315 for a total win of $30. The fallacy in both Martingales lies in the fact that if is there is a protracted losing streak, the table maximum (sometimes as low as $200) will prevent you from getting your money back. You won't be able to bet enough to recover your losses. You can title this system: The Great Chase.

Break time. I used that funny word, unit. Kind of begs the question: What is a "Unit," for crying out loud? In this sense, a unit refers to the amount of money you are using as your basic minimum bet size, be it two dollars, five dollars, ten dollars, one thousand dollars. This infamous unit size must be dictated by your bankroll, or the disposable money you can safely afford to lose, if the roof caves in, all goes wrong, and if every bet you make over an extended period of time goes down. You would have to be truly unfortunate for this to happen, and a combination of sensible money management and common sense should prevent this. You never know.

I believe the classic advice goes like this: Never bet more than what you can afford to lose. Scale your unit size accordingly. If your starting bankroll is $500 your unit size should be $5 or 1/100 of the total. You do the math for yourself. Generally you never want to risk more than 2-5% of your bankroll on any one bet. You may win if you do, but remember, this is gambling, not investment, blue-chip banking. Anything can and often does go wrong. There's smart gambling, and there's luck. It's a fool's choice to mistake the two.

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