I told a friend recently how much money I had made so far this year at video poker (well into 5 figures - that's at least $10,000) and his recommendation was to give up playing for the rest of the year, since I'd probably lose some or all of the money back. I went on to try to explain why I wasn't going to stop, but his eyes glazed over when I got to 'expected value' and other topics like that, so I just let the conversation tail off.

My friend is very successful in business and I respect his opinion, but he's not a 'gambler' (neither am I), and the only time he's ever been in a casino is when I took him and we played Blackjack together. He played his hands the way I told him and ended about even for the night. To him, that was a good deal. You see, my friend thinks I'm extraordinarily lucky and that's why I win at the casino. He's intelligent enough to understand that I have the edge in some games, but his accountancy background won't let him think I can win on a somewhat consistent basis without luck.

The other night I recalled his advice, maybe to convince myself that I still have the edge, because I've been losing most of my playing sessions since Labor Day. I'm still well ahead for the year, but I've blown back over $10,000 in two months. No fun. But what, really, was my choice? Sure, I could have quit, but then what would I do? The $$$ I use at video poker comes from a special bank account and I don't spend any of the profits; they just get plowed back into the account. So, if I didn't play, the money would only sit there, earning a whopping 3% per annum. Yet, my friend was right; I began losing, but here again, I had no choice.

Losing is part of the game and I never know when the losses are going to come. Even if I had stopped playing, when I began again, the losses would have probably occurred anyway. How is taking some time off going to change the pattern? If I average a 1.2% long term edge at dollar video poker, then my profits at the game will ultimately amount to 1.2% of all the $$$ I bet at the game. (I'm including slot clubs and progressive Royals in that 1.2% assumption.) Anyway, at a rate of 700 hands an hour at $5 a hand, I should realize a return of $42 an hour. But it can take a lot of hands to get to the 'Long Run'; about 4 million, or 6000 hours' play. In between, anything can happen, so it's a good bet that my short term return will average anything BUT $42 an hour. For the year, thus far, I'm averaging $37 an hour at dollar play.

I know I've explained this before, so bear with me if this is a repeat for you. That figure of $42 is what I call 'expected value'. From a strictly mathematical point of view, that's what I earn at VP. But reality is much, much different. The other night, I lost $960 in six hours' play. That's a loss of $160 an hour. On the other hand, I've hit 2 $5000+ Royals in the space of 10 hours' play; that's a profit of $1000 an hour. It comes and it goes, usually in big chunks. And there's not a thing I can do about it, if I continue to play. Sure, I could cut back to playing on quarter machines, but I'd hate to lose at dollars and try to make it back at quarters, plus I have enough $$$ in the account to outlast all but the worst losing streak. (How bad is bad? If I lose another $20K, it's gonna hurt.)

Am I doing anything different now? No. I'm still using proper playing strategy, so I'm not trying to 'grab' a Royal. I might be a bit more aggressive about taking advantage of double- or triple- 'point' days, but I still only play games where I have the edge. I might lose my bankroll and if I do, I'll raise another one and go right back at it. I'm not only convinced that I have the edge, but know it for certain. I often say that I invest in video poker and that's how it seems to me. If you invest in the stock market, you send your $$$ to your broker or mutual fund and you don't have the use of them until you sell the shares. I leave my $$$ at the casino until I 'cash in' and then I get them back. "Ah-ha", I hear you say, "but you may not get your money back". True, but who's guaranteeing that you'll get yours back? Remember, stocks also go down. The advantage of the stock market is that you don't have to put a lot of effort into it, especially if you buy mutual funds. I, on the other hand, have to put in the time to get my profit. But, there are some of you out there who do spend your fulltime handling your investments and I know it's a tough business. At least I get to eat for free.

I guess the point of all this is to convince you to become an investor at video poker. First, use only risk capital and start with enough to give yourself a fighting chance; about $10,000 ought to do it, if you play the right quarter games. And that brings us to Rule number 2: Play only at games where you have the edge. If your local casino doesn't have 100+% return games (including the slot club and Royals), don't play them, period. Third, if you qualify for #1 and #2, play properly. I can honestly say that I have not knowingly played a hand incorrectly throughout this losing streak in order to "go for it." And I'm not going to, either.