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Calculating Return on Investment in Relation to Poker

A Look At How To Best Measure Your Success As A Player

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In any area of finance, Return on Investment (ROI), is a measure designed to quantify just how well, or otherwise, those investments are performing. In some cases, this is easy to calculate as the rates of return are fixed – as is the case with bonds.

However, in many walks of financial life, an element of gambling is involved: Examples include investments in the property market, stocks and shares and, of course, betting in its many forms. In these cases, it becomes even more important to do the calculations and see just how any outlay is stacking up. Poker play can be particularly volatile so, just how does any player calculate their return on investment in order to identify its viability?

ROI is a very important aspect for poker players, both established professionals and newbies, and here’s how the principle works:

Basic Math

In poker, the return on investment relates to the amount that a player lays out in terms of tournament buy-ins, compared to the money that they win at the end of the competition. ROIs can be negative or positive but it’s important to pay attention to them in order to measure levels of success.

Let’s take an example in order to illustrate this: We’ll say, for the purposes of this calculation, that you have played a total of 100 Sit n Go tournaments, each of which has required an entry fee of $11.00. Your outlay as a running total is, therefore, $1100.00.

Having played through those tournaments, you’ve come out of them with winnings of $1250.00. You’re up which is good news but as a percentage, your return on investment is $1250.00 – $1100 / $1100 × 100 which equates to a positive ROI of 13.6%. Obviously, those figures are rounded up but by doing that simple calculation, you can easily calculate your poker return on investment using any numbers that occur following a run of tournaments.

Why Bother?

In simple terms, calculating a return on your poker investment can help to determine whether or not poker is the game for you. A spread of 100 games is a good sample size and 13.6% is a modest return but it’s a profit nevertheless. If over the same period of time, your ROI was a negative 13.6%, that’s not a big deal and it’s a figure that can be recovered.

However, a negative return on investment of -50% or higher, over 100 tournaments or more, may tend to suggest that you should be looking at another game to play. Winning is an incentive to keep playing while all responsible gambling channels tell you that you should not be chasing your losses. By calculating ROI, you can keep tabs on your success or defeats and use that information to decide whether to continue or, if your return is a positive one, you can work on playing strategies that could improve your work at the table and bring that percentage up even higher.

Long Term Outlook

In any form of gambling, return on investment must be viewed in the long term: It’s possible to go online and take out a couple of big early wins while similarly, players can be wiped out in the same amount of time. Taking these results as sole indicators for your ROI is not wise as they are skewed and are likely to level out over a period of time.

Those big wins can easily be brought into sharper focus by a run of losses while similarly, wipeouts at the table can be redressed with some victories further down the line. We’ve mentioned using 100 games in our example and this is certainly a strong starting point. Return on investment will certainly level out over time so keep persevering and don’t stop the calculations after that 100 mark as they can help you identify whether your percentages have dipped, leaving you to address any possible shortcomings in your poker play.

The Importance of ROI

It’s impossible to overstate the importance of Return on Investment for those who want to get online and play poker for an extended period of time. For newbies who are just trying the game out, results from a one-off tournament can be overlooked. You may play some hands and decide that poker isn’t for you, but beyond that opening point, return on investment is as vital as any playing strategy.

To recap on the points that we have made, if you intend to play poker for any length of time then start calculating your ROI from day one. The calculation in this guide relates to a specific example but it can be carried over to any set of results and it is very simple to work out.

If you’re not sure about playing poker and you are simply learning the ropes, a one-off game is fine or, you can play any of the free versions that are online without risking any of your own money. Even at this free play stage, notional ROI calculations can be made to identify how your game is developing to see if you have a positive or negative return on investment and whether it’s time to take the plunge and play tournaments for real.

Your basic toolbox can be as simple or as complicated as you like: Some experienced professionals prefer the Luddite approach by carrying out their calculations using a basic pen and paper but those who are less organized can head to the PC or laptop. Spreadsheets via various providers are a common tool for poker players and in some cases, it’s even possible to purchase software that will do the calculations for you.

Whatever your own preference may be, the first lesson is to understand the basic principle of return on investment and how it works in the areas of finance where profits and losses are uncertain. Having grasped that, be sure to comprehend the importance of ROI in poker play. It’s as important as learning the rules, developing your strategy and working on that all-important poker face.

 
 
 
 

Comments

shakhtar
over 2 years ago

This is a TERRIBLE article as to try and claim that a meager 100 game spread of anything, ESPECIALLY poker tournaments, where you have only a 20% or less chance to cash and usually over 300 places you can finish, is a good sample size. In fact, 100 games is so insignificant that the results of 100 games (even when that game has only 2 results and a 50% to 60% chance of success) is essentially meaningless and statistical noise. Even 1,000 games has a very significant variance factor that can make the results far from significant. I suggest you take a basic statistics course to educate yourselves on statistical variance. Personally, I have a 55.6% win rate in poker Heads up sit and go turbo's(where I can only finish 1rst or 2cnd) playing $100 and $50 games over a 100,000 game sample recorded over close to ten years, and even I will occasionally have a block of 1,000 games that result in a loss. Once in a blue moon, I'll have a rather significant loss over 1,000 games when the rake is in the equation. This is commonly referred to as a drawdown in the financial investment world. And 100 game blocks? Forget it. I have a 55.6% chance of winning a 2 man game over a random opponent, and I have had 100 game blocks ranging anywhere from 71 wins to only 39 wins. Yes, those are extremely rare results on both ends of the spectrum, but they do happen, and should illustrate that 100 game sample sizes are completely and utterly meaningless. And it really is somewhat irresponsible for you to try and convince new poker players that such an irrelevant sample size has any meaning as to their skill level, or worse, that they should actually draw conclusions as to if they should pursue poker as an income from such a meaningless sample size result.

 
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