How does the above post on the kelly criterion apply to poker?
If we want to maximize our expectation, we would maintain a "kelly" bankroll of [sigma^2/u]. If you never adjusted this bankroll, the risk of ruin formula shows that it would produce a risk of ruin of 13.5%. Most everyone agrees that maintaining only the Kelly bankroll is much too risky, even if you step up and down as required, because the fluctuations will be too great. Most people play some fraction of Kelly, like 1/2 or 1/4 Kelly, meaning that you maintain 2 or 4 times the Kelly bankroll. Just remember that in poker, unlike blackjack, stepping up usually means that the game gets tougher, so you need to wait longer before stepping up.