Risk of Ruin

The risk of ruin is the probability that a player loses all his money in a game of chance.

In a game with a random component like poker, the short term outcomes are determined by luck. The better players won't always win they will sometimes get bad cards just like everybody else. In the long term, though, luck will balance out. In the short term, however, it will probably not be balanced and will show strong deviations from the normal distribution. This is called variance.

With regard to poker, the risk of ruin is the probability of losing a given bankroll because of these short term swings. It is small when the bankroll is large since a long streak of bad luck is required to drain a large bankroll completely, and the probability of such a streak occurring drops off rapidly as its length increases.

Therefore, a solid bankroll management is essential for long term poker players in order to sustain play during phases of loss and still have enough money to return to profitability.

Related Topics:

Bankroll Management