Money Management Article

[ptmusic]

I agree that it is foolish to have stop-win strategy and walk away when you are winning at the table and hit that magic number. Mark Blade does a good job of explaining why that strategy is flawed.

But the stop-loss strategy is given merely a short paragraph:

"...you will have the exact same three result categories except they will be flip-flopped. And when you get to that decision making moment when you're down $500, you still won't know if you are more likely cutting off future losses or future gains. Whoops -- I lied again. You do know what's more likely from that point on -- Gains."

Huh? If Blade is suggesting that a player who has won $500 "can expect to make your one big bet per hour on average for every additional hour that you sit there at the table", then why does he suggest that a player who has lost $500 can expect gains too?

If there is a reason why both the winning and the losing player can expect gains, I missed that part of the article.

Perhaps Blade assumes that you are a winning player in long run, and therefore all stop limit strategies are foolish because you have a positive expectation in general. That may be true, but in the short run, your $500 loss could be because you mind isn't up to snuff for some reason, or maybe you are simply outclassed this time. I am a long-term winning player, but if Malmuth, Miller, and Sklansky decide to have some fun at my 9/18 table (and I didn't recognize them /images/graemlins/confused.gif ), and I find myself down $500 after a few hours, should I expect gains from that point forward?

"Keep playing whenever you have an advantage over your competition." Of course this is correct. Making an unbiased determination of who has the advantage, you or the competition, is sometimes extremely difficult.

I believe that a stop-loss strategy is sometimes correct. A stop-win strategy is almost never correct, as Blade proved well in his article.

-ptmusic

[Mark Blade]

Hi ptmusic,

Yes, I was assuming that you are a long-term winning expectation player. And yes, I was also assuming that this was still a profit expectation table that you were sitting at. (I'm sorry that my intention didn't come through clearly to you. I could see why it might not have.) Your insight, by the way, is exactly right if I hadn't been assuming that. In my defense (and of course, you would have no way of knowing what I am about to tell you), I have a follow-up article to this which goes on to explain the many ways why a so-called "money management" system could in fact be helpful in a practical way and your thoughts are already explicitly included. (Hey, great minds think alike!) Mason has not yet gotten back to me on whether or not that will be included in a future article. But if it is not, you could read about it in an upcoming book I have.

Thanks for reading my article and your great feedback. (By the way, isn't this TwoPlusTwo forum great in that we could share our ideas like this!

Mark Blade

[InfernoLL]

Don't you think it would have been prudent to explicitly explain why stop losses are often good, like the 30 BB rule? I doubt this would happen, but I wouldn't want a player to read that article and then decide to keep playing in a game where they were a legitamite loser for one reason or another.

I guess my point is there's a difference between saying something is ok and not saying it's wrong. I read the article and interpreted it as either condemning or ignoring the good reasons to use a stop loss rule. This disturbed me.

[Mark Blade]

Hi InfernoLL,

You make a very valid point. I suppose it would be very possible for someone to conclude that I was "either condemning or ignoring" any possible justification for "money management." That was probably a mistake for me to leave people with this impression. As I mentioned in a previous post, there is a follow-up article to this that I have submitted to Mason Malmuth and I'm still awaiting his decision regarding if it will or will not be included in a future month's issue. I do not want to spill the beans on what is included in that article as if Mason chooses to use it, Mason should also get to choose WHEN to use it. But suffice it to say that this possible future article gives many reasons (the article is even longer than my current one) why one might consider a "so-called money management" technique. It addresses your thoughts and many others that have not been mentioned. I say "so-called money management" because for what I consider to be the absolutely purest definition of money management, this current article of mine in this May edition covers it. That is why I was (and in some ways still am) comfortable with this article as a stand-alone piece. Why I am in some ways not comfortable with it is because of your valid points. In other words, there is the potential for confusion among those whose definition of "money management" is broader than my own. I probably should have anticipated this fact. But this is what is so great about the internet and the TwoPlusTwo magazine and forums in particular. I can now add an addendum to this article. Right here, right now. Damn, I love the internet! So here goes...

Now you might ask, "But what about the 30BB rule? Isn't there something to that? Or what about using your results as a way to gauge if the table is a profitable one for you? Isn't that a good idea? Aren't there any practical reasons for utilizing a money management technique?" In a word - maybe. But it's going to take a lot of explaining. I'll leave that story for another day.

I'm not trying to be coy here, but like I said, I want to let Mason make a decision first about if he's going to put the follow-up article in a future internet magazine. If he says "yes" and tells me what month it will appear, I'll let you know when to look for it. If he tells me "no," I will leave my e-mail address at that time and anyone interested can just e-mail me and I'll send you for free the follow-up article. Sound fair.

And now, InfernoLL, I think that anyone who had gotten the impression that I was definitely dismissing any and all possible justifications for a money management system will know that there just may be more to the story. Fair enough?

By the way, when I referred to your "valid points," please understand that I was only referring to what you said in your last paragraph. When you mentioned that "stop losses are often good" and that there is a "30BB rule," I may or may not believe in the validity of those notions, but again, as I want Mason to first make a decision on my follow-up article, I'm not comfortable spillng the beans yet on that.

Mark Blade