Money Matters

Everyone agrees that smart money management keeps you in control of your financial life.  Spend only what you have and save for a rainy day are common sense truisms.

But does money management make any difference in gambling?  Or does it just delay the inevitable?

In a 50/50 game of chance, because each outcome is completely independent, the way one manages his money should not matter in the long run, simply because his chances for success or ruin always remains the same: 50/50.

In fact, the odds of winning when betting your entire bankroll on a single decision is exactly the same as when you split your bankroll into smaller pieces to be bet over many decisions.  The only difference is how soon you double or lose your bankroll.  Psychologically, it feels very different, since time gives you an illusion of control and opportunity.  But the odds do not change.

On the other hand, one might reason that a method which maintains a break-even average will fluctuate above and below the break-even line, and thus, if one simply walks away each time he is up, in the long run he will be up, and money management made all the difference.  So in effect, money management with a robust method may help capture streaks of good fortune and to ride out streaks of bad fortune, allowing you to “quit while you’re ahead.”  While this is a characteristic of gambler’s conceit, it is by definition necessary for a consistently winning gambler.

In my simulations, I will be testing different money management procedures to examine and compare how effective they are.  At first, I will compare three money management procedures:

MM Procedure A.  No money management.

Just play the whole way through as if one had an unlimited bankroll.

MM Procedure B.  A stop loss of -20u.

If using a bet progression, the bet progression takes priority over the stop loss, but once the stop loss is exceeded, stop.  For example, suppose the present score is -18u and the stop loss is -20u.  If the bet progression requires a 4u bet, take the 4u bet even though losing it will cause the score to drop down to -22u, which is 2u under the stop loss.  However, if the 4u bet is indeed lost and the score drops to -22u, stop, since the stop loss has been exceeded.

MM Procedure C.  A comprehensive money management system with the following rules:

  • Use an initial stop loss of -20u.
  • For each decade attained, move up the stop loss to 5u less than the current decade. For example, once the score hits +10u, then the stop loss is moved up to +5u.  If +20u is hit, then the stop loss becomes +15u.  If +30u is reached, the stop loss is now +25u.  And so on.
  • If using a bet progression, let the bet progression take priority over the stop loss, but once the stop loss is exceeded, stop. This is the same as in Procedure B above.  Adjust accordingly since the stop loss is now raised for every decade attained.  For example, suppose the present score is +17u and the stop loss is +15u.  If the bet progression requires a 4u bet, take the 4u bet even though losing it will cause the score to drop down to +13u, which is 2u under the stop loss.  However, if the 4u bet is indeed lost and the score drops to +13u, stop, since the stop loss has been exceeded.
  • At decision 40, about half-way through the shoe, if the score has not reached at least +12u, stop playing. This simulates real-world playing psychology.  When encountering this situation, one assumes the shoe is tough and the chances for improving the score if one continues to play is slim, so, stop.
  • At decision 60, stop playing. This simulates real-world playing psychology, since the closer one plays to the end of the shoe, the less opportunities he will have to recover from a possible draw-down, forcing him to start a new shoe to recover those losses.

For now, I will not be testing a definite take profit point, because such a procedure places a definite cap on winnings per shoe.  Rather, I believe the notion, “Cut your losses short and let your profits run,” has a greater chance for success, and this concept is included in all of the money management procedures above.

If the simulation results suggest that using money management significantly improves performance, more money management procedures may be designed and tested in the future.

For each simulation, I will at first test two types of bet progressions:

1.  Flat bet.

Flat betting always bets a uniform amount for every bet.  The only way flat betting will win is if the method wins more than half of the bets.  In reality, one must also factor in the House advantage and commissions to achieve real winnings.

2.  U1D2M2 negative/positive progression.

This is a variation of the D’Alembert betting procedure, designed and popularized by Ellis C. Davis at beatthecasino.com.

U1 means “Up 1u” when you lose a bet.

D2 means “Down 2u” when you win a bet.

M2 means “Mandatory 2u” after any 1u bet.

See an example in my previous post Check, Please! for an illustratation of how U1D2M2 works.

Depending on the results, I may further explore other kinds of betting progressions, such as the Martingale, Fibonacci, D’Alembert, Labouchere, parlays, and other negative progressions; and Paroli and other positive progressions.  According to Ellis, U1D2M2 is more conservative and effective than most other betting progressions, so for now, I will use it for my initial simulations.

Mathematically, using any betting progressions in the long run does no better than flat betting.  In the short term, betting progressions can cover up a multitude of sins, but eventually all progressions will require one more unit than is available in the bankroll.  Unless one has an unlimited bankroll, a betting progression by itself can not consistently win.  What one hopes when using a betting progression is to catch conditions favorable to that progression, and most importantly, quit while you’re ahead!

Disclaimer:  The betting strategies and results presented are for educational and entertainment purposes only.  Gambling involves substantial risks, and the odds are not in the players favor by design.  The author does not state nor imply any system, method, or approach offers users any advantage, and he shall not be held liable under any circumstances for any losses whatsoever.

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28 Responses to “Money Matters”

  1. […] While this example used only U1D2M2 throughout the shoe, various money management strategies are tested to examine and compare their efficacy. […]

  2. […] A, B, C refer to Money Management Procedures (ref. Money Matters).

    Flat betting and U1D2M2 betting progression (ref. Money Matters). […]

  3. […] method, I tested 3 money management procedures and 2 betting methods, flat betting and U1D2M2 (ref. Money Matters).  In addition to P/B, I also based upon R/A another set of simulations with all of the above […]

  4. […] For example, the following is Shoe #553 from the Zumma 1000 collection played with OTT using U1D2M2 and no money management (ref. Money Matters): […]

  5. […] A, C refer to Money Management Procedures (ref. Money Matters). […]

  6. A, C refer to Money Management Procedures (ref. Money Matters).

  7. […] A, C refer to Money Management Procedures (ref. Money Matters). […]

  8. […] A, C refer to Money Management Procedures (ref. Money Matters). […]

  9. […] flat betting or using the U1D2M2 progression, the P.A.s remained essentially the same.  Using U1D2M2 lost more in terms of actual […]

  10. A, C refer to Money Management Procedures (ref. Money Matters).

    Flat betting and U1D2M2 betting progression (ref. Money Matters).

  11. […] A, C refer to Money Management Procedures (ref. Money Matters). […]

  12. […] A, C refer to Money Management Procedures (ref. Money Matters). […]

  13. […] A, C refer to Money Management Procedures (ref. Money Matters). […]

  14. […] As is true for all methods tested to date, money management and a negative progression U1D2M2 did not significantly affect performance (ref. Money Matters). […]

  15. […] I reduced this Martingale progression to the equivalent of 1, 2, 4, 8, and 16 units.  I also used U1D2M2 and flat betting.  The results show that when flat betting is generally break-even or positive, […]

  16. […] betting, U1D2M2, and Martingale (5 level:  1, 2, 4, 8, 16 units) betting […]

  17. […] A, C refer to Money Management Procedures (ref. Money Matters). […]

  18. […] To be consistent, I used the same money management procedure tested in prior simulations (ref. Money Matters).  As before, flat betting and U1D2M2 employed an initial stop loss of -20u.  However, for […]

  19. […] A, C refer to Money Management Procedures (ref. Money Matters). […]

  20. […] A, C refer to Money Management Procedures (ref. Money Matters). […]

  21. […] A, C refer to Money Management Procedures (ref. Money Matters). […]

  22. […] A = no money management C = money management procedure C (ref. Money Matters) […]

  23. This is a great article, Dave. How did your tests come out?

    • Thanks, Tony … the rest of my blog documents my findings that baccarat cannot be won in the long run, unfortunately. But in the short term, anything can happen!

  24. Dave,

    I have read several of your posts and simulations. As a student of the BTC team, I have done rather well at the casinos and have designed a system to track my actual play at casinos and make comparisons. Playing at my home casino, I have managed a statistically significant advantage, which am concerned may be due to table selection as the results of simulations I run against my own data don’t match up against the results I have from the Wizard of Odds data.

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