Why Loss Aversion Is the Worst for Real Money Poker Players

Man Looking Sideways Behind Fan of Cards

The famous Brazilian writer Luis Fernando Verissimo says that a man only knows himself in two situations. One is when he’s at gunpoint. The other is when he’s chasing a woman.

If Verissimo were to add a third situation, I think it could very well be related to poker, especially when a player is faced with the possibility of losing a good part of his bankroll in a single real money poker cash game session.

In that moment, it’ll become clear whether he’s prone to loss aversion.

What Is Loss Aversion?

In psychology, loss aversion is linked to what is called the “endowment effect.” This effect refers to a person’s tendency to overvalue whatever they possess.

If you’ve ever tried to sell an old sports jersey on the Internet, you’ve likely experienced this. For you, that jersey should be worth a lot. After all, it’s old. Consequently, it’s kind of rare.

This may lead you to ask for a higher price for it than most people would be willing to pay. And you may even get offended is somebody is only interested in buying your precious jersey for 1/4 less or so.

But you shouldn’t be. That person is simply experiencing the reverse of the endowment effect.

According to psychiatrist Richard L. Peterson in his book Inside the Investor’s Brain, “most people negatively value losses twice as intensely as they positively value gains.”

In other words, the hurt felt after a loss is double the joy felt after a win of the same magnitude.

And selling is a way of losing, just as buying is a way of winning. In fact, there’s a whole field of behavioral economics dedicated to the study of these types of phenomena.

And, since it’s a mix of psychology and economy, it should be the subject of study for any serious poker player.

Cash Games vs. Tournaments

As you can imagine, having too much loss aversion is a bad idea for most poker players. But it’s even worse for cash game players.

In most tournaments, all you can lose is a single buy-in. And, in many players’ minds, their buy-in is a bit like a lottery ticket.

This isn’t a fair comparison if we consider that poker is a game of skill. But it is a fair comparison when we think of those players’ states of mind.

They all know that, even if they’re skilled at poker, the odds of getting ITM tend to be against them. Consequently, apart from the bubble moment, they don’t experience such an intense loss aversion.

It’s not that they won’t be careful with their chips, it’s simply that they feel that their respective buy-ins don’t belong to them anymore. And they’re right in thinking like that.

In real money poker cash games, on the other hand, it’s much harder to escape the endowment effect. Because, usually, you can leave the table at any moment. This makes it losing all one’s buy-in a difficult idea for many players to accept. Even more so if they started that session winning some pots.

Loss Aversion When Winning

If you’ve ever played micro to low-stakes cash games online, you’ve witnessed something like this.

A player joins a table and, with a little bit of luck, manages to double his initial stack quickly. Next thing you know, that person is gone. This is such a common phenomenon in poker, that there’s even a name for it.

Actually, it can manifest itself in two different ways. If a player simply leaves the table shortly after winning lots of chips, this is called a “hit and run.” But if a player takes part of his chips while still in the game, this is called “going south.” (It’s usually prohibited.)

Four Kings With Poker Chips

Loss Aversion When Losing

When entering a cash game, most players have a percentage of their buy-in that they feel okay losing.

As we know, it’s a mistake to think like that. Once you enter a game, whether it’s at a online poker tournament or a cash game, your buy-in doesn’t belong to you anymore.

But, as I’ve said, that’s a hard pill to swallow for many cash game players. For some, it’s not so hard to call it a day if they’ve lost up to one-fourth of their money. For most, losing more than 1/2 of their buy-in is almost unbearable.

And what do they do then? They try to get even.

It’s like an investor who sees the price of an asset he bought losing value over time. If there’s a chance of recovering that loss, he will avoid selling that asset as much as possible.

In cash games, that situation is even worse than in the stock market. After all, one must also be aware of how he is perceived by other players. And once a player has lost many chips, he won’t have a domineering presence at that table.

Consequently, it will be harder for him to do any kind of intimidation play. If only they were to accept the possibility of cashing out with a bigger loss, then they’d be in much better shape to recover from that loss in future sessions.

However, by constantly playing until breaking even or until losing it all, they shoot themselves in the foot because they’re bound to get frustrated. And this will make them play much worse than before.

Poker Chips Stacked Decoratively

What to Do About Someone Else’s Loss Aversion

If you’re at a table playing with someone who has too much loss aversion, some things may happen.

In case that player more than doubles his initial buy-in quickly, as we’ve seen, he won’t be sitting there for too long. This may be frustrating to you if much of his wins came at your expense. But, unless you also consider that person a weak player, you should actually be happy.

After all, he’s lost a great opportunity to take advantage of having momentum at his side. Now, let’s imagine that that person is winning, but not so much.

It’s here that you can be more aggressive in trying to steal pots from him/her. Because he/she will have a tendency to be a little more conservative. Finally, what if that person is losing? It’s likely that he will be more aggressive and a little less cautious than usual.

This is the trickiest situation of the three. But it might also be the most lucrative for you.

If you’re adept at a more loose style, you can get into more pots against a losing player. It’s not that you should be throwing money away. But this would be a great moment for you to develop a more carefree image.

The reason for this is that, if that player doesn’t recover soon, he’s likely to go on tilt. And you’ll be in an excellent spot to take advantage of such emotional instability.

What to Do About Your Own Loss Aversion?

If all that’s been said resonates with how you feel, you likely have a considerable level of loss aversion.

Should you stick to tournament poker then?

Only you can answer that question. But it must be said that (at least to a certain extent) you can manage those feelings. Some people do this with alcohol or some other drug (legal or not).

This is something that will only make things worse for you in the long run, though. After all, you must deal with what’s behind this issue. And, whether you like it or not, there’s no substitute for experience.

I mean that in more than one way. First, because you must go through risky situations. Second, because you must experience the fear, and not numb yourself.

The importance of experience is also mentioned in that Richard Peterson’s book I’ve already mentioned. However, Peterson’s main advice for investors suffering from loss aversion is a more rational one. That advice is to have a plan.

But how do you apply this to poker? One thing you can do is decide in advance which circumstances you’re going to stay at a table and when you’re going to leave it.

As a poker player, this may be tricky because you also have to take into account your performance. And you know how hard it is to be objective about it.

It’s so hard that some players don’t even try. They just stay as long as there’s a game going on and they have chips. But, if that’s you, then I guess that loss aversion isn’t your biggest issue, is it?


In spite of everything that’s been said, loss aversion isn’t all bad. It’s even necessary sometimes. Fearlessness is helpful in poker and in the stock market. But some people’s brains also seem to be way too oriented towards rewards.

This can make them fall prey to addictions and other self-destructive tendencies. We’ve seen that happen more than once in the poker community. Let’s hope we don’t need to see it happen so often from now on.