Freerolls in Poker

Freeroll tournaments in online poker sites are nothing out of the norm. The funny part, however, is that even though they are called “free” rolls they typically aren’t free at all. Most freeroll tournaments require a certain amount of points in order to play. These points can only be obtained by playing real money hands, which means it requires you to pay. These point accumulations are essentially payment for the tournament and therefore take the whole meaning out of using the term free at all. There are, however, some online sites that allow people to play freerolls without having to pay anything and give them the chance to win real money like everyone else, although these sites are not typical.

There is also another form of freeroll, although it is debatable whether or not it can be considered a freeroll or not, and that is the free entry to another tournament after having paid and played in a feeder tournament first. However debatable such freeroll tournament is, it is a very typical form of freeroll tournaments in brick and mortar casinos as well as online.

If you are someone who finds a particular interest in these types of freeroll tournament games, then the following information will be useful to you. You can try the information out and with enough luck you might even be able to earn yourself a decent bankroll from zero by playing at these freeroll tournaments at a relevant poker room!

Looking at the Long-Term

Tournament poker can be a very tough business. No matter how good you are, you're bound to encounter long periods where things don't go well. On the tournament circuit, even the best players can go several months - or even a couple of years - between significant cashes. These dry spells can be tough to deal with if you don't develop a solid mental approach to the game.

I think the down times are particularly difficult for younger players who have some success early in their careers. They come to expect great results and can become overwhelmed when things go badly in a long string of tournaments. They may grow frustrated and are apt to assume they're making mistakes. They make changes in their games that aren't well thought out, and they suffer because of it.

To endure the long, tough stretches, serious players need to understand that bad runs are inevitable. They're part of this business. And while there's something to be said for going into every tournament with a positive attitude, it's also important to be realistic. If you expect to win every tournament you enter, the disappointment that accompanies repeated bust outs could be very damaging to your psyche. I know that early in my career, my confidence suffered when I went through a rough stretch.

Over time, however, I learned to focus my attention in productive ways. Now, when I'm playing in a tournament, I concentrate on making the best decisions I can. I try to approach every hand in a thorough and effective manner. If my focus is good at the table, I can be honest with myself as I assess what I'm doing well and where I need improvement. I'm not likely to fall into the traps that ensnare other players. Many refuse to admit mistakes and insist that a bad run is due to bad luck alone. Others believe they're playing well when their results are good, even though they're playing poorly and are benefiting from a great run of cards.

After a tournament is over, I'm quick to remember that tournament poker requires the temperament of a marathoner, not a sprinter. If I play well and consistently make good decisions, I'll be rewarded, though it may be a long time before I see the results I'm looking for.

What Poker Can Teach You About Investing

David Nelson
Senior Vice President, Legg Mason Funds Management

The very quick précis of my talk is in Bill's portfolio management comments from the annual report of 2003 which is in your packets, specifically the quotation from Walter Pierson who is a personal hero of both Bill's and mine. He says, "ain't only three things to gamblin': knowing the 60/40 end of a proposition, money management, and knowing yourself." Pretty much the same thing applies to investing.The very quick prcis of my talk is in Bill's portfolio management

Why talk about poker? Well, we're in Las Vegas, so what better thing to talk about than gambling? Also, you can learn the basics of poker and investing in about five minutes and then spend the whole rest of your life trying to understand the nuances. I've been an investor for over thirty years and I learn things every day. Also by the end of our session together, you'll find that the skill sets for poker and for investing are surprisingly similar. A lot of the talks that you have heard today tie together. You'll see things in my talk that relate to some things that Lisa mentioned-the process of playing poker and the process of investing are more about how you make decisions. Terry talked about behavioral finance and poker is enormously influenced by the way people think. People make decisions in very quirky ways, as he pointed out.

Poker and investing are about good decision making. Let's take a little test here together. In decision number one, you have (A) the opportunity for a sure gain of $240 or (B) a 25% chance to gain $1,000. Which would you rather have? In decision number two, you have (C) a sure loss of $750 or (D) a 75% chance to lose $1,000. Which one of those two most appeals to you?

Amos Tversky and his partner Daniel Kahneman (who recently won the Nobel Prize) did a series of studies, and given a choice between the $240 and the 25% chance to gain $1,000, 84% of the people choose the sure gain (A). Given the choice between the sure loss of $750 or the 75% chance to lose $1,000, 87% of the people select the 75% chance (D). Overall, 73% wanted the sure gain and the 75% chance of a loss (A and D together) and only 3% selected the 25% chance of gain and the sure loss of $750 (B and C together).

Let's aggregate the outcomes of these two decisions and see where we come out. If you choose both A and D, then 25% of the time you gain $240 and 75% of the time you lose $760. If you choose C and D in aggregate, you have a 25% chance of gaining $250 and a 75% chance of losing $750. In the B and C aggregate, you make more when you win and lose less when you lose, so this combination is the most valuable. Yet, only a very small percentage of people actually choose this. Why? Because people are risk averse in the domain of gains (they would love to have a bird in the hand or a sure thing), but in the game of losses, they are risk seekers (people do not want to take a loss and they will do almost anything to avoid it). One of the things people do to avoid a loss is take a risk at losing even more in the hopes that luck will favor them. People, therefore, make sub-optimal decisions.

Poker is all about decisions. Warren Buffett wrote, "As they say in poker, 'if you've been in the game 30 minutes and you don't know who the patsy is, you're the patsy!'"

I'd like to clear up a misconception that has been perpetrated by my boss, Bill Miller. I did not spend five hours at the poker table on Wednesday: I spent about an hour-and-a-half. [laughter] I did not have chips worth $200,000. I had a large stack of low denomination chips. Now, it was considerably more than $100 as well. So somewhere in that range of $100-$200,000 is correct. [more laughter] I'm not going to narrow my estimate any more than that. I will say that I made money, which I am pleased about.

I'm going to talk to you about low limit poker, which is a much different thing than high stakes poker like they play at the World Series of Poker, or no limit games. Those kinds of games are way out of my league and a different skill set obtains. There are distinct personality types for the different types of poker. I play in a monthly game with seven or eight guys. Some people consistently lose money and some consistently make money. The guys that make money don't seem to mind that much. They enjoy the conviviality and the experience. The guys that make money normally keep their mouths shut and don't rub it in too much. Imagine a matrix of personality types. There are people who are aggressive players and those who are passive players. There are also people who are loose players and people who are tight players. When you say a person plays tight, you mean that they don't play a lot of hands. Someone who plays loose plays lots of hands. Someone who is passive generally tends to be in a lot of hands but is never very aggressive and doesn't raise a lot. Someone who is aggressive tends to press the bet when he has the advantage. The kind of person you want to play against is someone who is a wild man-very aggressive, and plays very loose. The kind of person you don't want to play against is someone who plays very few hands and plays aggressively when he has the advantage-the 60/40 end of the proposition.

Now the key to winning in low stakes poker is folding. If you're playing an eight-handed game and the luck of the draw is evenly distributed, you're going to have the best hand about one in eight times. So seven out of eight times, if you're playing only your good hands, you should be sitting on the sidelines. People don't do that. When you play once a month or every couple of weeks, people want to mix it up. They want to be in the hands and get the action and see what the next card will bring. So they will not fold to the extent that you need to because it's no fun and it requires discipline and patience. You can see where I'm starting to head in comparing investing with poker. Successful investing is boring. It takes place over years of time and involves accumulations of wealth in periods of years and decades as opposed to minutes, hours and weeks. If you're at the country club and you're talking about the latest stock you bought, most people want to talk about the thing that went up $10 the last week. They don't want to say, "I'm in a mutual fund and I think I'll make 7%-8% annually until I retire and at that rate I'll be able to achieve my financial goals." But that's the way you really should be thinking about investing-over a lifetime.

This is something that Ken Warren said about Texas Hold-em: "More money is lost by players who know what the right thing to do is, but don't do it, than for any other reason. Having a strategy, a game plan and the discipline to stick to it are, along with a sufficient bankroll, the four most important things that a player needs to be a winner." You could say the same thing about investing. Game plan, strategy, discipline and obviously, bankroll.

There are a number of similarities between poker and investing. You have to be patient to do both well. Both are games of incomplete information. The tough thing about investing is the amount of information that you don't know and don't control. Lisa talked about scenario analysis and probability analysis. You don't know what's going to happen a lot of the time, but you do enough analysis so that the probabilities are in your favor when you make a particular investment. In poker, you weigh the odds in your favor by only playing those hands where you either have the best hand or have the best draw.

Understanding human nature is the biggest similarity between these two activities. People make very bad judgments. People underperform their own investments. The market goes up 12% and the typical mutual fund goes up 10%-11%. The average investor in those mutual funds makes 2%-4%. They do substantially worse than their own investments because they tend to buy when the market is up and they feel good, and they tend to get frightened and sell out when things are bad. People make all kinds of bad decisions at the poker table. They get too greedy and they get frightened. They don't analyze things on a probability basis and they don't know how to control their own emotions.

Here's an example of the use of probability from the poker realm. In a five card draw game, with a four flush (four cards to a flush plus one other card) or a four-card open-ended straight draw (let's say a 6,7,8 and 9) is it correct to call a $10 bet with $50 in the pot? You need to go through a mental process in considering this problem. If you have five cards in a draw game, there are 47 cards that you have not seen. If you are drawing to a flush, there are nine cards out of the thirteen in the suit that can help you and there are 38 cards that are of no help to you at all. Therefore the odds are 4.22:1 against making that flush. In the case of the straight, the four fives and the four tens help you, so there are eight cards out of the 47, and the odds are 4.88:1 against making the straight. The answer is that you are advised to make the call because the odds of making the flush or the straight are less than the pot odds (your $10 in a $50 pot).

You've seen this line in the Pogo cartoon: "we have met the enemy...and he is us." Nothing could be more true in investing. With nearly 30 years of investing experience, I have a hard time making decisions all the time on a rational basis as opposed to an emotional basis. The hardest thing for brokers or money managers in our business is to lengthen our time horizon. We look at our funds and get quotes every ten minutes or so. So three or four hours seems like a long time and a week seems like forever. A month or a year is infinity. When I was with Investment Counselors of Maryland I found that the clients that I talked to and met with once a year tended to do much better than the clients I met with once a quarter. The clients that called me up all the time to ask me about stocks or the economy tended to do the worst of all. The farther you can lengthen your time horizon in the investment process, the better off you will be.

Earlier today, Terry talked about a number of behavioral issues: cognitive illusion, attitudes towards risk, mental accounting, over-confidence. All of these are quirky ways in which people make decisions that causes them to be bad poker players and poor investors. In poker and in investing, "hope" can be a very expensive word. "I hope that the company willā€¦" When you're in a poker game and you start out with a three good cards in seven card stud and then the next two cards are nothing, you should be out of that hand. You shouldn't be hoping that the sixth card or the last card will save you. That kind of decision process will cost you money. That's true in the investment process as well.

The same kind of maxims that will save you money at the poker table will save you money in the investment process. In poker, they say, "have the best hand, the best draw, or get out." In other words, know when you have the 60/40 end of the proposition. Know when the odds are in your favor and bet, or know when the odds are not in your favor and get out of the way. "Raise or fold," is another maxim used in poker. If you have a hand that's worth being in, then the hand is worth raising. If it's not worth raising, then it's probably not worth being in. You can save a lot of money in poker and in investing if you know when to say adios. But the thing that works against us is that people want to hope and they hate taking losses. They are willing to seek risk to avoid losses. They will not sell their losers. When people are thinking about money or gains or losses, they're not making decisions on a rational basis. And obviously, "cut your losses and let your profits run," is the standard maxim in investing.

Control your emotions. Losing your cool in poker-regret, anger, self-pity-is called "going on tilt." If you get angry and you start feeling sorry for yourself, you better get up and walk away because you're getting ready to give somebody a lot of money. The most important decision in poker and in investing is always "what is the right thing to do next?"

There are other similarities between poker and investing. The purpose of both is to make money. Game selection is critical to success. You want to play with as unprofessional people as you can find if you play poker. You need to be conscious of the "rake." Every gambling game is going to have a certain house rake. Every investment process will have some kind of fee or commission associated with it. Finally, you can learn a lot by analyzing your mistakes.

There are two main differences between poker and investing. Investing is not a zero-sum game, but poker is. Deception is not a part of the investment process, but it is critically important in poker. In fact people didn't even want me to put the word "deception" in this presentation because of the current environment.

In poker and investing, you have to have a game plan and the patience and discipline to stick to it. You have to minimize your losses and maximize your gains. You must understand the math of the game-the probabilities. You must understand human nature, especially your own. And you must be able to control your own emotions.

Q: In poker, probabilities can be calculated explicitly. In investing, probabilities are harder to determine. How do you assess probabilities in investing?

A: That gets back to the investment process that Lisa was talking about. The more ways you can come at an investment idea and the more methods you can use to analyze it, the better off you are. If a Central Tendency of Value is a relatively narrow range of values vs. a broad range of values, the probabilities of success are much higher.

Q: Can you give an example of when you folded and what the results were? Or when you wish you folded?

A: Rather than any specific example, I and most other people I know would be better off figuring out we were wrong sooner, and then getting out of the way quicker. As they say in the business, "there's no sin in being wrong; the sin is in staying wrong."

Investing or poker: Which takes more skill?

John Kay has an excellent piece in the Feb. 6 Financial Times where he discusses the similarities between investing and gambling. He points out that the great majority of fund managers have inconsistent results from year to year. He concludes in the last paragraph of the article, "If the measure of skill is how often good performance repeats itself, poker is a more skillful activity than investment management."

Most of the article concerns the history of London's Gutshot Club, but Kay suggests the London Stock Exchange should take note of some lessons from the gambling world. "In life as in poker, the occasional coup does not necessarily demonstrate skill and superlative performance is not the ability to eliminate chance," Kay observes. "That is how we know Warren Buffett is a skilled investor and Johnny Chan a skilled poker player."

To learn more about the similarities between poker and investing, and the psychology of money, I have a couple book recommendations:

Poker Face of Wall Street: This is written by Aaron Brown, a professional trader and professional poker player. He uses gambling to teach investors how to analyze and embrace financial risk. It's an entertaining read.

Why Smart People Make Big Money Mistakes: This is the classic book on the field of behavioral finance. Authors Gary Belsky and Thomas Gilovich hope to help readers make more money by showing them the psychological reasons why so many people make the same financial blunders. Every investor needs to read this book.

Playing serious Poker? How much should you invest?

Playing serious Poker? How much should you invest?

Why poker professionally?
Most people play poker just for the sake of fun and the sheer excitement it brings. They may invest huge amounts and if they win it’s great, but even if they lose they can look at it as money well spent on entertainment. Even if someone doesn’t have a lot of money to invest they can still enjoy the thrill of poker games just by using play money.
However there are also those who treat playing poker as their profession and in fact their livelihood depends on the bets they win and the money they make on the poker table. Now if you are one of them then you need to know how much money you need to have in hand to be a serious poker professional.
A word of caution
We start off with a word of caution. If you are new to the game or if you have not yet mastered the skills that are generally considered a must for professional poker players, it is better that you restrict yourself to a small amount. It is always better that you start off with something to the tune of $50 to $100 and place your money in micro bets. This way you wont lose a lot of money even if you lose a few games in succession. And although if you win the returns wouldn’t be great, you still will learn a lot about the game. So you may consider this initial investment as money spent on a poker-learning course. It is only after you have mastered the basic skills and are relatively confident about your playing that you should move on t more serious gaming.
What should be your approach?
If you are decided that you want to play poker professionally, then you must consider it as your business venture. it is a business which is run by the capital you invest and being the only shareholder you deserve some returns on your investment. Once you approach the whole thing as a business venture it is always easier for you to manage your money wisely. You would need a lot of self-discipline as there would be no one to motivate you here and playing poker as a professional is not just about playing, it is your profession. You should also know how to save the money you earn because if you end up spending all that you have earned after a string of wins it can be hard for you when things are not going exactly as they were planned.
How much should you invest?
This depends largely on how much you can invest and how much you want to invest. If you have been playing poker for a while and if you are seriously considering turning pro then it is expected you would know how much you need.

But as a thumb rule you can do with 200 times the amount of the biggest bet you want to play. So if you plan to play bets of $10-$20 you need to have $4000 ready.

Poker indeed depends a lot on your skill but the luck factor also has a key role. So it can happen that after all your efforts and even with a very good hand you manage to lose. It is better to have the flexibility to lose a few games and still survive so that when it’s your time you can be around; if you are running short on cash you may miss that opportunity. So poker does require a fairly good bankroll, as we all know to money makes money.

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