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Quatloos! > Quatloosia! > Quatloosian Guide to Gambling > Money Management

Money Management

Almost all the gambling books you will read will extol Money Management as the final piece of the puzzle which will let you gamble with the pros. The truth is that because the House Advantage eventually wears everybody down, there are no Pro Gamblers outside of Poker and Sports Booking, etc. and there is no Money Management system which will guarantee that you will always win at the tables.

Opening Caveat

The casinos, in fact, love Money Management systems because it does two things:

  • It gives gamblers a false sense of security that they can consistently beat the House (they can't)

  • It keeps gamblers at the tables for longer periods of time (i.e., more Risk Cycles) thus giving the casinos a much greater likelihood of wearing them down

So, Money Management is actually a dangerous thing, because it can benefit the House, which is never in your best interest (there are no "Win-Win" games at a casino). Yet, at the same time you must impose on yourself certain Money Management rules, and have a Money Management System. The difference between smart gamblers and suckers is that the suckers believe that Money Management is a cure-all and smart gamblers realize the limitations of Money Management systems and its role in casino betting.

Beware many of the books which extol the virtues of Money Management, as most of their systems are mathematically unsound. If you can't 100% understand the mathematics of the system, don't use it.

Why Money Management IS Critically Important

Before you walk into the casino you must know two things:

  • How much you are willing to lose before you quit -- You should only gamble what you can afford to lose, without worrying or becoming emotional about it. Because if you lose and worry about it, you are likely to become a "panicked gambler" who takes wild odds in the hope of recouping losses (hint: "panicked gamblers" never win).

  • How much you are willing to accept as your winnings and quit if you get ahead -- To be a winner, you have to walk away from the casino a winner. If you get ahead and continue to gamble, the House Advantage will eventually wear you back down. Thus, you have to have in your mind a reasonable pre-determined number where you say "OK, if I get up by $X dollars I will be satisfied and leave the casino not matter how hot I am at that moment." If you do not set this number in advance, and you do get ahead, the most likely thing that will happen is that the House Advantage will kick in and you will lose it all right back -- and walk away a loser. You may remember and talk about for days that great "hot streak" you had, but your ability to pay your credit card bill for you gambling weekend when it comes due is the real test of whether you were a winner or not.

Trivia: Las Vegas is replete with stories of "whales" (large bettors) who cleaned the casinos out of millions during a hot streak, and the casinos did something to keep them on-premises (whether telling them that the Lear Jet broke down or whatever), and then the "whales" losing it right back because they were persuaded to go back and gamble a little more. Why would a casino want to bring a hot bettor back for more gambling? Simply because the casino knows that because of the House Advantage over time it will always come out the winner.

This is Money Management at its most basic. If you have not made these two critically important determinations before you enter the casino, you have committed yourself to a dangerous course where you can end up losing much more than you can afford.

Money Management System -- The Basics

After you have determined how much you can stand to lose, and when you will walk away from the casino if you get ahead, you can then focus on developing a Money Management Strategy. The goal of a Money Management System is to enhance your casino earnings -- and thus reducing the House Advantage -- without substantially increasing your risk.

A couple of important points:

  • Money Management Systems only really work if your luck and play decreases the House Advantage to a "Statistical Dead Heat" with the House, i..e, at least less than 1%.

  • Even the best Money Management System will not make up for bad luck or bad play.

  • If you are unlucky or play badly, a poor Money Management System will likely make your losses much worse than if you made the identical bets every hand, spin or roll.

  • A Money Management System which has as a goal only that you can stay and play for a long time and thus win comps, is inherently flawed, because eventually the House Advantage will wear you down irrespective of how good your Money Management System is.

Doubling Systems

Some casino "experts" advocate a variety of "doubling" systems. These are uniformly disasters in the making.

Let-It-Ride Strategies -- This says that when you win you should double your bet. What this guarantees is that when you lose you will do so with your highest bet, not a smart idea. Only suckers Let-It-Ride.

Double-After-Loss Strategies -- This strategy can be successful for a while. The trouble is that if you keep losing, your bets will exponentially increase to where you can no longer "cover" and then you have really lost big.

A Basic Money Management System

To illustrate how a basic money management system operates -- and can fail -- let's look at a progressive betting system, where every time you win you increase your bet by one unit, and when you lose you decrease your betting by one unit. The idea here is that when you are "hot" you should be upping your bets, and when you're "cold" you should be decreasing your bets.

With the below chart, assume you are playing Roulette and starting off with a $50 bet. If you lose, you will decrease your bet by $10 and if you win you will increase your bet by $10. Sounds pretty good, eh? Let's see how you will do, assuming your win 50% of the spins.

 Your Bet   Result   Winnings   Losses 
$50 L   $50
$40 L   $40
$30 L   $30
$20 W $20  
$30 W $30  
$40 L   $40
$30 W $30  
$40 L   $40
$30 W $30  
$40 W $40  
Totals 5W/5L $150 $200

Ouch! With this system, you won 50% of the time but still lost $50. This illustrates a system which sounds pretty good -- it is even advocated by several self-appointed gambling "experts" -- but which is mathematically unsound and which will send you to the Poor Farm quicker than if you had used no system at all.

A Basic Money Management System Which Works

So, let's take the above system and turn it on it's head. If we lose, we will increase our bet by $10, but if we lose we will decrease our bet by $10. The theory here is simply that we will always win $10 more than when we lose.

 Your Bet   Result   Winnings   Losses 
$50 L   $50
$60 L   $60
$70 L   $70
$80 W $80  
$70 W $70  
$60 L   $60
$70 W $70  
$60 L   $60
$70 W $70  
$60 W $60  
Totals 5W/5L $350 $300

Net Gain: $50

Shazaam! Now we're up $50 on the House, or $10 for every win we had -- Mortgage the condo, pack the wife, we're leavin' for Vegas tonight! Not quite, for while this is a System which works, it will still not overcome the House Advantage or bad luck.

Let's look at what would have happened if the last roll was a loss instead of a win:

 Your Bet   Result   Winnings   Losses 
$50 L   $50
$60 L   $60
$70 L   $70
$80 W $80  
$70 W $70  
$60 L   $60
$70 W $70  
$60 L   $60
$70 W $70  
$60 L   $60
Totals 4W/6L $290 $360

Net Loss: $70

What this illustrates is that even with a mathematically sound money management system, you will still walk away a loser unless you can win at least 1/2 of the time. If you can't win at least 1/2 of the time (whether you play badly or Lady Luck simply doesn't like you), then you will lose whether or not you have a sound Money Management Strategy in place.

However, note that even if you a losing, a good Money Management System will help you cut your losses. In the foregoing example, if you had simply bet $50 each time, then your 4 wins would have produced $200 and your 6 losses would have totaled $300, meaning that you would have lost $100 -- whereas by this Money Management System you lost only $70 (i.e., your losses are still $30 less than they would have been if you had NO system).

So the fact that Money Management Systems are not a cure-all does not mean that you should ignore Money Management Systems -- as shown they can increase your yield. But for this system to win you must also have the luck and skill to play the casino "at par" or within the "statistical dead heat" of a House Advantage of less than 1%.

For this system to work, you have to either beat the House or play the House close to even. The problem with this system is that if you have bad luck or make bad decisions, you're bets will spiral up, to where you are making larger bets than you want to make.

So with this system there is a final rule: Before the game begins, you must set in your mind a given size of a bet. When you reach that size of bet, you must declare yourself a loser and leave the table. Else, your bets will keep increasing as you lose, and you will end up a "desperate gambler" -- and desperate gamblers never win.

What happens if you beat the casino more than 50% of the time and end up betting zero? Easy: You've won. Cash out your winnings, don't bet the rest of the weekend, and walk away knowing that you are one of the very few people who has ever "beat" the casino!

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