Online Poker Study: The More Hands You Win, the More Money You Lose

Discussion in 'Trading' started by TraderZones, Jan 13, 2010.

  1. The correlations to trading are striking (bold)

    Online Poker Study: The More Hands You Win, the More Money You Lose

    ScienceDaily (Jan. 13, 2010) — A new Cornell study of online poker seems counterintuitive: The more hands players win, the less money they're likely to collect -- especially when it comes to novice players.

    The likely reason, said Cornell sociology doctoral student Kyle Siler, whose study analyzed 27 million online poker hands, is that the multiple wins are likely for small stakes, and the more you play, the more likely you will eventually be walloped by occasional -- but significant -- losses.

    This finding, Siler said, "coincides with observations in behavioral economics that people overweigh their frequent small gains vis-à-vis occasional large losses, and vice versa." In other words,
    players feel positively reinforced by their streak of wins but have difficulty fully understanding how their occasional large losses offset their gains.

    The study, which was published online in December in the Journal of Gambling Studies and will be published in a forthcoming print edition later this year, also found that for small-stakes players, small pairs (from twos to sevens) were actually more valuable than medium pairs (eights through jacks).

    "This is because small pairs have a less ambiguous value, and medium pairs are better hands but have more ambiguous values that small-stakes players apparently have trouble understanding," said Siler, a long-time poker player himself.
    Siler used the software PokerTracker to upload and analyze small-stakes, medium-stakes and high-stakes hands of No-Limit Texas Hold'em with six seats at the table. The game has simple rules and "any single hand can involve players risking their entire stack of chips," Siler said.

    The research not only examined the "strategic demography" of poker at different levels of stakes and the various payoffs associated with different strategies at varying levels of play, but also "speaks to how humans handle risk and uncertainty," said Siler, whose look at online poker combines aspects of behavioral economics, economic sociology and social science theory. "Riskiness may be profitable, especially in higher-stakes games, but it also increases the variance and uncertainty in payoffs. Living one's life, calibrating multiple strategies and managing a bankroll is particularly challenging when enduring wild and erratic swings in short-term luck and results."

    In online poker, a multibillion dollar industry, Siler concluded that the biggest opponent for many players may be themselves, "given the challenges of optimizing one's mindset and strategies, both in the card game and the meta-games of psychology, rationality and socio-economic arbitrage which hover beneath it," he said.
  2. That is a great article. I preach to people that they must sit on their hand when there are no trades to do.

  3. So does this mean, the more hands you lose, the more money you make? I should be filthy rich by now, if that's the case . . .
  4. yes in this mkt, you will sit on your hands for the next 8 years.

  5. lol :p
  6. This person understands very little about poker. The conclusion is right, but the explanation is wrong.

    The way to win the maximum number of hands won in poker is simply to play every hand to the last street, and bet at every opportunity to maximize the chance an opponent folds. You will never lose a hand you could have won following this approach.

    However, it also maximizes the number of hands you loose. It's not so much the size of the losers as it is the sheer number that undoes you. The second problem is that your more selective opponents will always take you for the maximum number of bets (or full stacks in NL/PL) when they're best, but you will not be able to do the same to them.
  7. If your few winning hands are big enough, then yes, that's one way.
  8. Most novices go in to the flop with cards that are too weak to play and then are a bit too slow in letting go of the hand that they have "invested" in.

    The similarities with trading are direct and unmistakable. Both are easy games to play yet very difficult to win. After spending a great deal of time commuting to AC in the spring of 2006, I spent that summer -- ten weeks -- in Atlantic City. I came back to NYC on Sunday nights and headed back down to AC every Wednesday morning putting in about 50 hours a week on the tables. I started every Wednesday playing NL 1/2 and, if things went well, traded up to 2/5.

    I set a firm $900 limit to a days losses. My plan was pretty straightforward. I believed that, particularly in 1/2 but also in 2/5, the skill levels at various tables had huge variance. If seated at a table with average or better players I quickly asked for a table change. If the second table had average or better players after a polite period (a short polite period -- no mare than 15 minutes) I left the table and that room. I kept a pocket full of jitney tickets handy and I went to another hotel and continued to search for weak player comprising a weak table.

    I covered my expenses for the summer but no better. I believe there are very few (15 or 20 at most) No Limit players in AC that make a full time living at it. I suspect there are a few more limit players (maybe 30 to 40) that grind it out full time. It is a much more certain "trade" for it is a much more math based equation than No Limit.

    Through a close friend -- a full time NL winner and an extraordinary poker player -- I met a few of the "inside crowd" including the guy who, before a prison term and his subsequent retirement, "ran" AC for some guys in Philly. I got a pretty good semi-professional feel for the game, the real players and the town.

    The reality is that most of the old timers who people see on TV and revere made their pile cheating. Brunson pretty much tells you that in his book. He talks about traveling with his partner from town to town before settling in Vegas. Well the minute you partner up and play at the same table you are cheating. Old habits die hard and the early days of NL hold'em in Vegas were filled with "irregularities".

    Day trading is a far better game. The big difference is those with patience can wait with no worry that the blinds will eat them up. THIS IS A SMALL EDGE AND NOT TO BE SQUANDERED. The next time you wait two, four or more hours for your setup remember that you are winning. That type of patience is essential for the new trader and valuable for all traders. You can afford to wait for what you have determined is "your trade". Don't be afraid to trade off a 15 or even a 30 minute chart rather than believing the action is at three or five minutes.

    I believe what I have just expressed is a valid way to use poker and the blinds to illustrate how you can enhance your edge. I am not suggesting in and of itself patience is enough to give you an edge but if you have even a small edge patience could very well enhance it enough to allow you to survive and look for a bit bigger edge.

    Survival is key to, well, your I can't tell you how careful the real players in AC are and how much of a bankroll they feel they need to play even small stakes poker. One I respect a great deal estimated that for a very good player to be reasonably certain that his edge would win out over time he would require at least a $20,000 bankroll to play 2/5 NL every day. Anything less than 20 grand was, in his parlance, "taking a shot at the game not playing the game."

    BTW, he had no problem with a player, even a pro, stepping upn a level with a PORTION of h0is capital and "taking a shot" but he believes it is essential that the player understands that it is an aberation ... not how he makes his living. His take was that while a really good player still had an edge with a $10,000 bankroll in a 2/5 environment the law of large numbers (which reigns supreme) made that edge uncomfortably small. And that believing you had a big edge in that game because you were much more skilled than the other players was strictly an amateur move.

    Now this same guy once, in Vegas, used a roll of only a few thousand to "come back" and, starting at $1/2 and living VERY tight, rebuild his roll. But this guy who has played for big money against many of the big names does not fool himself that his edge against the lame 1/2 player is that great. It is not so much the competition that dictates the need for a cushion of capital but THE LAW ... the law of large numbers.

    That summer in AC was quite a valuable hiatus in life for me. Even having a real edge is just a start. You need capital and the patience to watch it grow yet still trade small. The reality is for most who make it that initial spurt when they catch it right and double or even triple their capital makes them that much less under capitalized.

    The problem with the patient approach is it is much easier said than done.
  9. rosy2


    the only issue i have with this is that he only studied No-Limit Texas Hold'em.

    IMO holdem is the least skillful game and most random. What are the results for stud, omaha, and low games?
  10. Very interesting post, Swan Noir. Reminds me of a book I read stating that there is no way that the same group of players could statistically end up at the winning tables in many tournaments as they frequently do (considering the luck element). Your post corroborates much of that sentiment.
    #10     Jan 13, 2010