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#21
08-11-2005, 12:11 AM
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True Confessions of Variance Obsession
So I said 20 buy-in drawdown...
And you found one that was 39... At a completely different level. How does that invalidate my point... That low end SNGs are a very low risk business proposition? And exactly why is a 20-30 buy-in downswing a disaster? Seems pretty normal to me. I've read several articles on ZeeJustin's web site... And he is definitely not playing Party 22s. The higher you go... The lower your ROI... The higher your variance... The greater your potential downswings. It also matters if you play a very aggressive push game... As opposed to using more finesse. I have a database of about 2000 SNGs... Mostly Party 22s and 33s from June-Aug ... And then I label all the Party Leaderboard guys. When I set the minimum to 10 tourneys played... I'm left with 33 players. Of these 33... 10 are June or July Top 100 Leaderboard players... With tournies played ranging from 10 to 50. Of these 10... 7 are way up, 2 break even... And only one is on a 10 game downturn. As a group these 10 people (9 guys and 1 lady)... With a sample size of about 200 tournies... Are just ** totally cleaning up **... Just crushing the weak opposition. My personal biggest downswing so far is 5-6 buy-ins... Which is virtually erased by 1st place finish. This is risk? I need fancy stats for what? I just don't see it... Unless you are a homeless man with $200 in your shoe. At the low end Party SNGs... The Leaderboard players TOTALLY OUTCLASS their opposition... Play 30-40 per day... And just leave variance in the dust. The only people sweating variance... Are the marginal, undercapitalized subsistence players. You know... The ones that shouldn't be trying to play poker for a living. Are you one of those guys? Don't be. rm+ [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] 
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#22
08-11-2005, 09:04 AM
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Re: Major Problem with Bill Chin\'s Article on Variance
[ QUOTE ]
It's ironic that you would give this practice as an example because it's the opposite. Your own theorem shows that if the casino carried coloring up customers and taking ever-larger bets to its ultimate extreme the casino would eventually go bankrupt. Gambler's ruin is a problem for the side that is +EV. [/ QUOTE ] I think you're crediting me with a bigger point than I'm trying to make. The original post said that standard deviation was not useful when the underlying distribution was not symmetric. I replied that if you have enough independent outcomes, the shape of the underlying per-bet distribution doesn't matter much, and standard deviation is useful for long-term risk analysis. But if you don't have independence, standard deviation of individual bets can be an unreliable guide to long-term risk. The Poker and casino examples were answers to the question of why someone might think individual bets were not independent. I'm not claiming that these effects are enough to invalidate standard deviation in Poker or casinos. It's all theory. You're entirely correct that a casino that chipped up forever would eventually go broke. However large their customer base, someone would win 20 in a row betting black on roulette, or take every hand in six decks of blackjack, or have a similar streak at the craps tables. That's why casinos also have maximum bet limits. It's surprising to a lot of people how low those limits are relative to the available capital and daily profits of the casino, given how big the house edge is. But even a huge casino would face a significant probability of bankruptcy if it followed a gambler's ruin strategy. The real point of chipping up, as you say, is to maximize profit, since the casino makes more money from a large bet than a small one. But it also has the desirable effect (from the casino's point of view) of increasing the standard deviation of customer outcome. A casino with a 40% average drop doesn't want every customer to walk out with 60% of their initial stake. Too much money walks out the door to other casinos, and people would stop coming back. It's much better if lots of people lose all their money, but a few walk away with big wins. That's good advertising, since people always exaggerate the amount and frequency of these events. Plus, those winners will take their money home, and return to lose it later, rather than stopping into the casino next door. Chipping up helps most winners go broke, but a few winners become spectacular winners. Whenever you see those pictures of big winners with giant checks, think "chipped up," just as bulging muscles these days make you think "steroids." In Poker, one hand influences the next. It may well be true that these effects average out over a hour or two of play, or don't exist at all with good players. But certainly with bad and average players, if a guy is caught in a bluff, he's more likely to get called the next time he bets big; while if he wins with a strong hand, he's less likely to be called. Also, big losers often become looser, or even move to a higher stakes table to try to recoup their losses.
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#23
08-11-2005, 01:29 PM
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Re: True Confessions of Variance Obsession
[ QUOTE ]
. My personal biggest downswing so far is 5-6 buy-ins... Which is virtually erased by 1st place finish. This is risk? I need fancy stats for what? I just don't see it... Unless you are a homeless man with $200 in your shoe. At the low end Party SNGs... The Leaderboard players TOTALLY OUTCLASS their opposition... Play 30-40 per day... And just leave variance in the dust. The only people sweating variance... Are the marginal, undercapitalized subsistence players. You know... The ones that shouldn't be trying to play poker for a living. Are you one of those guys? Don't be. rm+ [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [/ QUOTE ] If you aren't paying attention to variance at all, then maybe you are playing stakes that are too small for yur bankroll. Or maybe your skill level doesn't allow you to play higher. I agree that SNGs are statistically superior to a lot of other poker endeavors at low stakes. The problem is that they get a lot tougher as you go up. I can crush the 20$ SNGs, but it is pretty small potatoes; its like working for minimum wage.
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#24
08-11-2005, 01:30 PM
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Re: True Confessions of Variance Obsession
[ QUOTE ]
At the low end Party SNGs... The Leaderboard players TOTALLY OUTCLASS their opposition... Play 30-40 per day... And just leave variance in the dust. [/ QUOTE ] This just plain old isn't true. You have implied in your previous postings that the variance is small, that is not as large as the "freshman statistics" say it will be for good players. I have provided real-world evidence to the contrary. Now you change your story to only be referring to low buy-in STT's. Guess what. Even very, very good STT players who "totally outclass" the competition do not "leave variance in the dust." They experience variance as well, however they 1) know to expect it and are sufficiently bankrolled to absorb the variance and 2) play so many per day/week that the variance is a bump in the road that they are past relatively quickly. That is not to say they don't feel it at all -- reference the ZeeJustin 39 buy-in drop blog entry. And his is not the only mention of drops like this. Other good players have posted about drops like this at every level in the STT forum. RE: your database. Wow -- 200 whole tourneys on these guys, huh? That's some ginormous sample size you have there. It's basically meaningless. There are guys who post in the STT forum about how great they are. They can crush the STT's. They have sample sizes around that range. Guess what -- it doesn't last. 200 tournies is NOTHING. You can get someone's ROI to within +/- 22 percentage points with that sample size. At that point, you're just beginning to be able to say your a better than break even player, let alone how much better than break even you are. Are STT's a nice money-maker? Yes. Is variance smaller than limit ring game play? Unquestionably. Is variance and are downswings larger than you are saying? Absolutely yes. The statistics predict it and real-world results (with sufficient sample sizes) from very good players confirm it.
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#25
08-11-2005, 05:23 PM
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The Marginal Player Is The Mother Of All Fish
[ QUOTE ]
If you aren't paying attention to variance at all, then maybe you are playing stakes that are too small for yur bankroll. Or maybe your skill level doesn't allow you to play higher. [/ QUOTE ] Right on both counts... But I haven't started for real... Because I'm reworking my trading infrastructure... To allow me to manage high volume SNG play... In the same way that my software allows me to make 100 trades/day on the NYSE. "too small for your bankroll" I idea is not to "optimize" earnings by magnifying risk... (This is for gamblers)... But to grind out profits with ZERO medium to long term risk. I'll explain later. [ QUOTE ] I agree that SNGs are statistically superior to a lot of other poker endeavors at low stakes. The problem is that they get a lot tougher as you go up. I can crush the 20$ SNGs, but it is pretty small potatoes; its like working for minimum wage. [/ QUOTE ] You are underestimating... The amount of money Leaderboard Players make on SNGs. Because the Party Leaderboard formula is non-linear... And skewed to the low end games... Roughly 50% of the Leaderboard guys are playing $22 and $33. It's trivial to reverse engineer the Leaderboard... And ** estimate ** how much people are making. This is a correction... To the numbers I posted a few days ago: #1 $12,000/month #50 $4,500/month #100 $3,500/month #200 $2,500/month (probably high) #300 $2,000/month (probably high) The 200-300 range is probably high... Because you can make zero money and place this high... Just on sheer volume played. If I can be #50-#100 in 6 months and skim $3,000/month off SNGs... Then it's worth my while as a sideline... But ONLY because I have a 6 figure income trading stock. (And poker is just so damn interesting mathematically). In conclusion: Real world Pros... whether it's stock trading or poker... Are expert at risk management that eliminates serious damage. If you have a big 20% edge in the Game... Your losing streaks consist of breaking even for a while... And your winning streaks consist of doing 30-40% for a while. Repeat... Your "losing streaks" consist of breaking even for a few weeks. Gambler's ruin does not even come into play... For properly capitalized players with a Big Edge. Two examples of "properly capitalized players with a Big Edge" are... Most of the Leaderboard SNG players... About 10% of hedge fund managers. For example... I have a Big Edge in the stock market... Significantly bigger than a comparable 20% SNG ROI edge... And over 5 years my hedge fund Units have tripled in value (up 200%)... While my biggest drawdown in 5 years has been about 4%. I might be concerned about variance 20% of the time... But mostly it's been 90% arbitraged out. Hard to believe? Well... Edwin Thorpe... The father of blackjack counting... Still runs a similar, but much larger, operation... Makes 3000 trades/day and has results similar to mine. (Google Thorpe and learn a lot). I read the article by Chin... And it's stuff I knew when I was 18. If someone doesn't have the sense... Or the means to put together $10,000 for a 500 buy-in $22 SNG bankroll... Why in the world should I take that person seriously? If someone needs Chin to tell them very basic stuff... It's extremely unlikely that person is going places. When I start doing 30-40 SNGs/day... A $10,000 bankroll which is 5% of my net worth... Will leave me with no worries about variance... And risk/reward ratio of $10,000 invested... With expectation of $2,000-$3,000/month in profit. In conclusion: As a general rule... The losers and marginal players around here... Give themselves away with their obsession with variance. And a marginal player is the Mother of all Fish... Because that person has sacrificed everything... To make a dreary, subsistence level "living" at poker. Reading posts by losers is a waste of time. But yours was nice, Professor. Regards, rm+ [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img]
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#26
08-11-2005, 06:09 PM
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Re: The Marginal Player Is The Mother Of All Fish
[ QUOTE ]
If you have a big 20% edge in the Game... Your losing streaks consist of breaking even for a while... And your winning streaks consist of doing 30-40% for a while. [/ QUOTE ] Please defing "big 10% edge". You're spouting a bunch of flim-flam and pseudo-mathematics without any real supporting proofs or real-world observed results. Your 200 sample results and "reverse engineered" assumptions don't count. Average $ won per month has nothing whatsoever to do with variance. For a good player, with 95% confidence, about 200 SnG's is enough to ensure breakeven. If a very good player plays 200 SnG's in a week, then for any weeklong span that player has a 95% chance to come out breakeven or better. During that week, however, they could be down 20, 30, or more buy-ins. And then there's the 5% chance that they end up worse than breakeven...
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#27
08-12-2005, 11:39 AM
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Academics Have a Poor Track Record In The Real World
Most academic types...
Have been notoriously unsuccessful in the financial markets. One reason for this... Is that they believe that using overly complex mathematical approaches... Can somehow defeat their true opponents... Who are the sophisticated market pros... Like a CBOT floor trader or NYSE market maker... A top Wall Street firm or a top Hedge Fund Manager. I've been doing this for 20 years... And you cannot use complex math... To take money away from Market Pros... (Or World Class Poker players for that matter). Market pros develop shortcuts... That closely approximate high level math... (As do World Class Poker players). Also... Market pros will have a significant advantage... Using ** real world ** risk management techiques... Which incorporate knowledge and analysis... Which is not easily quantified by high level mathematics. They will crush the academic type in the long run. (As will a World Class Poker player). What works best is a simple rational concept... In a very well defined market niche... And extemely disciplined implementation with low transaction costs. Generally... When I read about some academics starting a hedge fund... Using some complex mathematical approach to the markets... I laugh... Because they are out of their depth... And the stock market pros will eat them for lunch. Regards, rm+ [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img]
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#28
08-12-2005, 12:27 PM
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Re: Academics Have a Poor Track Record In The Real World
[ QUOTE ]
Market pros will have a significant advantage... Using ** real world ** risk management techiques... Which incorporate knowledge and analysis... Which is not easily quantified by high level mathematics. [/ QUOTE ] How do you know these '** real world ** risk management techiques' work ? chez
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#29
08-12-2005, 01:10 PM
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Re: Academics Have a Poor Track Record In The Real World
[ QUOTE ]
Market pros develop shortcuts... That closely approximate high level math... (As do World Class Poker players).. ... What works best is a simple rational concept... [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [/ QUOTE ] You want it both ways... You want to approximate high-level math... by using shortcuts... But where do you get the shortcuts...? And... the simple rational concept will always lead to... mathematical analysis... Ellipsis ad infinitum... ad nauseum.
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#30
08-12-2005, 01:16 PM
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Re: Academics Have a Poor Track Record In The Real World
I would define a "market pro"...
As someone with at least 10 years of experience... Managing, say, $1 million or more... And trading very actively (> 50 trades/day)... So this is a pro who has made >100,000 trades... ** Over an entire bull/bear market cycle **. I would especially totally eliminate anyone... That has a good 1-2 year track record and nothing more... Because that person is likely a "lucky coin flipper". Now I will give you a simple stock hedge... A typical "risk arbitrage" position for a market pro... For example, Hedging GM (common stock)... Versus GXM (convertible debenture unit trading on the NYSE). Now what are the 10 things that can go wrong with that position? What are the various risks? Convertible specific risks? NYSE specific risks? Short sale specific risks? Liquidity risks? Market risks? Industry risks? Company performance and credit risks? Is something goes wrong... exactly what do you do? Well... Mathematics cannot give you the answer to those questions. Only through experience (taking losses and learning)... Will you know all of the (mostly rare) things that can do wrong... And whether to avoid that position entirely... Or how to manage it and limit risk... Or when to get out. For example... I would avoid that position entirely... For at least 3 good reasons. But there are no books... Or academic papers that can teach you this... Only 10 years and 100,000 trades. It's very much an art form learned through experience... Just like World Class level poker play. rm+ [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img]
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