The following by Mike Caro first appeared in Poker Digest in 2002.
If I were a normal sort of guy with a normally functioning mind, I would have yielded to common wisdom. That common wisdom says stop losses are just the right tool to save your poker bankroll. But, of course, I’m not normal, so I never say that.
Instead, I point out that that “stop loss” is a cherished concept for many poker players. Stop loss has millions of fans, but I’m not one of them. If you’re new to gambling, maybe you don’t know what the term means. Stop loss simply means that you’re not worried about ever suffering a terrible loss, because you’ve predetermined to quit if you lose a given amount. Now the lecture…
Imagine that you set a stop-loss at $500 in a $20/$40 hold ’em game. That’s equal to two-and-a-half minimum buy-ins, since a minimum buy-in is usually considered to be 10 times the small bet. As soon as you move beyond $500 negative, you’ll quit on your next big blind. This means you might lose a little more than $500 during the leaving-the-table process, but not substantially more. While other players around you might lose $1,000, $2,000 or who knows how much, this will never happen to you.
Should you use a stop loss? I don’t. And, I don’t think you should, either. Before I tell you what’s bad about a stop loss, I’ll be fair and tell you what’s good.
Good stuff about stop loss
The first good thing is that you’ll never get numbed by bigger losses than you anticipated, start playing poorly, and dig yourself into a serious hole it might take a long time to crawl out of – if you ever crawl out at all. With a stop loss, you can accept a more manageable defeat, go home, lick your wounds, and contemplate with your goldfish. That part’s good for many players who are afraid they may lose control of themselves if the loss builds too large and who like to hang out with their goldfish.
This benefit has a lot to do with Caro’s Threshold of Misery. Did I ever tell you about that? It states that in poker and in life you can reach a stage where the misery grows so great you stop caring. You already feel maximum pain. Maximum misery. If more bad things happen in life or if you lose more money in poker that night, it doesn’t feel any worse. You’re maxed out. You’ve crossed the Threshold of Misery.
I teach that you’re supposed to keep right on playing well, even after you cross that threshold. You’ve got to remind yourself that even though things don’t seem to matter now, there will come a time when they do matter. So, make good decisions. Maybe right now it doesn’t seem to matter a lick whether you lose $4,495 or $4,125, but there will come a time when that $370 matters again. Always play poker as if that time is now. That’s important and I’ll repeat it. There will come a time when that $370 matters again and you should play poker as if that time is now.
More good stuff
But, OK, if quitting before you get anywhere near that Threshold of Misery is the only thing that will allow you to avoid logical brain shutdown that will cost you significant money or devastate your bankroll, then – by all means – practice a stop loss. What else is good about a stop loss? Well, if you’re playing in a back room of a tavern off the wharf, you might be getting cheated and not know it. So, quitting because you reached a predetermined limit can keep you out of further danger.
Or you might have misjudged the skill of your opponents. Maybe the game isn’t as good as you thought it was. Maybe you’re not the favorite and you should expect to lose more if you keep playing. In that case, too, a stop loss can keep you out of danger and preserve your bankroll.
And there’s one more thing that’s potentially good about a stop loss. It prompts you to quit when you’re losing, which often can be a good thing in itself, even if the game was originally profitable. The reason has nothing to do with superstition. It has to do with the fact that when your opponents see you losing, they sometimes get inspired and play better. They think, hey, there’s someone unluckier than I am. I’ll beat up on that player.
When this happens you won’t make the profit you normally would, because players will take unexpected shots at you. And they’ll push their good hands for extra value, because they’re not intimidated by you. In this case, it’s sometimes a good idea to quit the game.
A final thing, for some players a stop loss can keep setbacks psychologically manageable. They can go home and sleep well knowing that no significant damage has been done in a single day. A bad streak still can continue, but it will be broken up into smaller, more psychologically manageable segments.
Some bad stuff about stop loss
OK, I’ve been fair. I’ve said all the good things I can think of about stop loss. Now I’m going to tell you that the whole concept sucks. It makes no logical sense at all. It’s just babble.
You see, everything I told you that was good about stop loss can be accomplished by you without it, just by using your own good judgment. You can be aware of the Threshold of Misery and discipline yourself to keep making good decisions. You can decide to quit at any point if you fear you’re being cheated – before that magic stop loss number or after it – whenever you decide it’s right.
How does that predetermined number help you? It doesn’t. It just takes tools out of your hands – thinking tools that let you decide whether its profitable to keep playing or to quit. Same goes for whether your opponents might be stronger than you estimated. You can quit or don’t quit, whichever seems wiser, without a stop loss. Quit very early or tough it out if you think you can still win. What good is a predetermined magic quitting number? No good at all. Same if opponents see you losing. Yes, they’ll often play better, but it’s up to you to decide right then if this is a strong enough factor to make you quit. You decide. Not a magic number. You decide.
The most illogical thing about stop loss is that it often has the opposite effect of what’s intended. You see, if you’re a professional poker player or even a serious one, you need to think of poker like you would a job. You get paid to make the right decisions and, even though there are lots of fluctuations, you still get paid by the hour. If you’re a winning player in a profitable game, the more hours you play, the more money you earn, on average.
Stopping the profit
So, if you’re in a good game, you’re earning a given amount an hour. If you take yourself out of that game because you’re losing a predetermined amount of dollars, you’re cutting off your hourly funds, you’re shutting down your profit flow. You won’t work as many hours and, in the long run, you probably won’t win as much money. That’s the way to look at a stop loss. If you rigidly apply it, you’ll sometimes be excluding yourself from playing more hours in profitable games and you’ll be costing yourself money. That makes a stop loss a stop win.
Another illogical thing about stop loss is that people think that by dividing their time into segments, they can avoid long losing streaks. The truth is, if the game is good now, you might be more likely to extend your losing streak if you quit and come back tomorrow when the game is worse than by continuing to play right now. Interrupting a streak does not kill it. That’s nonsense. Your streak will either continue or not continue the next time you play, whether that’s next week or right now. You might stop it by quitting, true; but you also might prolong it the next day when it would have stopped if you’d kept playing tonight. You just never know, and because you never know, you should not expect a stop loss to save you.
So, I’m not a fan of stop loss. You should consider quitting when you’re losing, of course. But you need to weigh all the factors working against you to decide whether the next hour is profitable enough for you to play. You can’t make that decision if you’ve taken away your options by setting a pre-determined stop loss. So, why do it? — MC