written by: John
It is very important for all players to look at poker as a life long session. All the plays you make, beats you take and money won simply does not mean much of anything in a short span of time. What will matter is how these stats look after a player has played thousands and thousands of hands or games.
One important stat that is essential to understand and calculate is poker ROI. ROI stands for 'return on investment' which really translates to how much money are you making in comparison to what you are spending to play.
For example, if a player were to buy into a $6.50 9-man sit n go, this player would stand to win $29.25 for first, $17.55 for second and $11.70 for third respectively. If this player were to win first place, the ROI would be calculated into a percentage based on his or her winnings minus the difference of his or her initial buy-in.
This may seem confusing at first, but is much easier to understand once you know how to calculate ROI.
How to Calculate Your ROI
Calculating poker ROI is very simple to do using the following formula:
* ($ Won - Buy In) / Buy In x 100 = ROI %
So using our example of a $6.50 9-man sit n go, let us assume that our player won first place. What would this player's ROI be? Well, let's plug in the numbers.
* ($29.25 - $6.50) / $6.50 x 100 = 350%
Wow! This is an incredible ROI as it shows that this player has earned 3.5 times his initial investment.
However, this is actually very deceiving. The reason that it is deceiving is because as we mentioned above, poker is a life long session and should not be based on one game. In other words, would you rather have an excellent ROI after one game and be a life long loser or lose one game and be a winning player over the course of your poker career?
I would lose one game and prefer to be a life long winner.
It is important that since poker is a life long session that it is understood that there are variances that will undoubtedly take place. That's why a ROI of 350% is unreasonable as it only shows one game and not a life long session of ups and downs.
For example, let's assume that our player played 1,000 games at the same stakes and won 1st place 77 times, 2nd place 186 times and third place 103 times. What is this player's ROI now?
First, we need to know how much this player won total. To do that, we will do the following:
* 1st Place - 77 x $29.25 = $2252.25
* 2nd Place - 186 x $17.55 = $3264.30
* 3rd Place - 103 x $11.70 = $1205.10
* Total Won = $6721.65
Now, you need to know how much your investment was:
* 1,000 games x $6.50/game = $6,500
To figure out our ROI all we need to do now is plug in our numbers into our handy formula:
* ($6721.65 - $6,500) / $6,500 x 100 = 3.41%
As you can see, that is quite a significant difference from a 350% ROI. This player here has played a standard sample size which should have had several variances, up and down, and has proved to be slightly profitable over time.
So, what is a solid ROI? Well, opinions will vary but the most common answer found will be around 10% or so. It is possible to be much higher, but if a player is looking at an ROI of 20%, 30%, or more, than it may be in their best interest to move up in stakes even if it means dropping the ROI a little bit. This is simply because even though the ROI will drop due to competition and such, there will be so much more money to be made playing at higher stakes. As long as a player is around 5 to 10%, they should be just fine.
Since we have tournament and sit n go ROI out of the way, it is time to now focus on all of you cash game players. Sadly, no, the ROI formula will not work for you.
Cash Game ROI
The ROI formula described above will not work for cash games because there are just too many different variables with no consistencies. Cash game players can sit down, buy in for the minimum up to the maximum, play for 5 minutes, then get up, and leave whenever they want. There is no set buy-in and worse yet it is much more difficult to use the ROI formula because there is no set prize pool either.
If a player wants to figure out how well they are doing at cash games, they will want to figure out how much money they are making per hour, similar to a job.
For example, if a player were to go online and buy in for $100 at a $1/$2 game and at the end of 1 hour they had $225 in front of them, they would subtract their buy-in from their total to see how much they profited.
* Total - Buy In = Profit
* Profit/Amount of Hours = $ Won / Hour
So, in our case, this is how much this player made per hour:
* $225 - $100 = $125
* $125/1 = $125 per hour
If he had the same amount after 8 hours, it would look like this:
* $225 - $100 = $125
* $125/8 = $15.63 per hour
This method of calculating an hourly rate can actually be used to figure out your hourly average over the course of a week, month or even a year as long as you keep track of how much you buy-in for each session, what you walk away with and how many hours you played each session. From here, you can determine how profitable you are at cash games.
Calculating Poker ROI
Hopefully it is apparent by now that calculating poker ROI is actually very easy to do. Not to mention that it is extremely important to learn simply because everyone has improvements to make in their game, whether good or bad, and knowing your ROI will let you know the extent of those improvements. Making improvements and adjustments is what poker is all about and solid poker players know this.