Can You Afford to Play Low-Stakes Online Poker?
It may come as a surprise to you: when you go down in stakes, the rake goes up exponentially. This fact is not well known.
Number of big blinds raked every 100 hands
Of course, we're talking relative rake, measured in big blinds. It's often given as the number of big blinds raked per 100 hands played (BB/100). At $10/20 you'll typically rake around 1.5 BB/100, while at $0.5/1 it's more likely to be around 8 BB/100.
In absolute numbers, you rake more at the higher stakes ($30/100 hands) compared to the lower stakes ($8/100 hands), but measured in big blinds, higher stakes are much less expensive to play at.
Rake increases exponentially
As a matter of fact, when you go down in stakes the relative rake tends to increase exponentially:
The increased relative rake affects your win rate and your return on investment (ROI).
Let's say that before the rake you're a winning player, averaging 8 BB/100 on $0.5/1 but only 2 BB/100 on $10/20 - still before the rake.
When the rake has been deducted, you're instead an even money player at the lower stake and a small winner at the higher stake, in this example.
Larger bankroll required
The rake also affects your bankroll requirements, that is, how big a bankroll you need to play at a certain level. When you calculate the required bankroll, the essential input is your win rate compared to the blinds.
In the example above, since you're not a winner at $0.5/1, you would need an infinite bankroll to play those games.
So, in reality, how many big blinds per 100 hands can you expect to win at different stakes? It seems logical to assume that this number is lower on higher stakes, since the resistance will be harder.
Among pros it's regarded as perfectly acceptable to be making maybe 10 big blind per 100 hands over the long haul. Figures like 20 BB/100 are considered a bit on the extreme side. At $25/50, you could make a decent hourly income by winning merely 2 BB/100, or even less if you play several tables
Remember that we're talking very long run here. Even if you scored 40BB/100 over the last 2-3 days, it doesn't mean you should quit your day job. You'll probably see a downward trend over the next weeks.
Low stakes can be beaten
Nevertheless, despite the exponential growth of the rake at lower stakes, you probably still need a smaller bankroll at lower stakes.
To ever get into the long run, where the rake comes in as a major factor, you need to survive the short run. And in the short run, the rake isn't the primary threat, the swings are. Losing a number of buy-ins due to bad beats and/or bad play is what brings down most of us.
Also, the fine example of Chris "Jesus" Ferguson turning $0 into $10,000 proves that low stakes can be beaten.