John Tabatabai is running bad. He's a poker player and he's not winning. And he knows why he's not winning: he needs to play more hands. Tabatabai is 23 years old. By the time he was 20, he had won and lost $100,000 at least six times, playing online. But back then, a poker-lifetime ago, he wasn't counting. Now he's monitoring his profits and losses daily, keeping his betting levels in step with his mood and the poker gods, eating well, getting plenty of rest and striving to play 50,000 hands a month.

But the way things are going, he'll have to "destroy" the $5-$10 no-limit hold'em level (where the player to the left of the dealer has to make a blind $5 bet, and the player next to him a blind $10 bet) before he even thinks of moving back up to $10-$20 games or higher. "There's nothing worse than moving up too quickly," he says. "Losing a huge amount of money, that hurts you. Then you can't play your game."

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Despite his aggressive language, Tabatabai is polite and softly spoken, his tones hinting both at his Cardiff upbringing and his Persian heritage. His discipline is revealing of his journey from reckless player going "on tilt" (playing badly because he is angry), to calm and philosophical poker trader. For him, there's now more to life than poker, and that's why he's working his way out of his present slump, plugging away from his Thames-side flat in central London, enjoying the spoils of being good at his job.

The details of all the times he blew his past bankrolls have merged into a painful mass, the memory of which prompts a long sigh. "It's devastating." Thinking about it brings back the 18-hour days, the 36-hour marathon sessions, the weeks and months of playing great poker, everything going right, building a small amount into a large amount, then losing it in three days, two days, even just one. "You make stupid mistakes, ridiculous, rash decisions. You lose it when you're drunk. You're left with nothing. The only thing you can do is start from the bottom. And it's all your fault."

After one wipe-out three years ago, he was offered an alternative way to get back in the game. While Tabatabai had been working at graduating both from Reading University (with a law degree) and from the Ladbrokes poker site, two fellow Ladbrokes players had spotted the similarities that online poker shared with financial trading.

Chris Smith started trading on the metals exchange when he was 18 and in 1993 set up Manro Haydan, a company that makes financial trades using its own money - so-called "prop-trading". John Conroy left Dublin 25 years ago to teach sailing and climbing in the Lake District, before moving into various consultancy roles in the IT industry. Online, the pair had been toying with the idea of setting up a poker sponsorship business - a plan they fleshed out during their first face-to-face meeting three years ago, over dinner. The result was BadBeat, with Conroy as the first trader, funded to the tune of $5m, run out of Manro Haydan's offices and supported by the same IT infrastructure and risk-management controls.

Smith and Conroy were pretty sure a talented poker player with a disciplined attitude would win more if bankrolled properly. That player would also make money for the people doing the bankrolling. BadBeat's basic model is that it puts up all the cash for its poker traders to play, splits the winnings 50/50 and takes the losses. The players are self-employed and most work from home to avoid the opportunity or suggestion of collusion.

The idea is working, but the venture's founders discovered the hard way the best methods to recruit and manage winning players. "There are lots of full-time poker players," says Conroy, "but not many professional poker players. The first year, we lost money, but we've made it ever since. It was a pure experiment and it's become a proper business."

Although online poker sites do not announce what proportion of their customers actually win money, professionals estimate that about 95 per cent of players lose. The main reason for BadBeat's initial losses was that its first recruits were high-profile names from the UK's live poker circuit. They didn't share the "skill set" and approach that Smith and Conroy had felt would make profitable poker traders - the work ethic, the preparation, the understanding of the market and the discipline. Instead, they were old-school gamblers, with some of the skills but none of the focused delivery.

Then came the "internet-kiddie" recruits such as Tabatabai, who Smith and Conroy had become aware of on Ladbrokes. Tabatabai's bravura play had made him a name. Looking back, he says: "It seemed as though it was recklessness towards money. But in essence, it was not treating it as money, but as points. I had no responsibilities; it was like a game to me. I was just doing what I thought would make me the most points."

Impressed with this raw talent, BadBeat decided to fund him, depositing the entire bankroll lump sum in Tabatabai's poker account. He didn't stick to his given limits and lost $24,000. Tabatabai was out. "We were learning," says Conroy. "We assessed the risk and that was the downside."

Tabatabai is unrepentant. "You can't give that much money to poker players and expect them to stick to the limits. It was just stupid on everybody's part. Stupid on my part and stupid on their part. We've all learnt."

Manro Haydan's motto - "Risk not thy whole wad" - is stencilled on the wall of the trading floor. It could have been written for BadBeat, and it has been wholeheartedly adopted. Tabatabai was invited back. But this meant coming into the Manro Haydan office, working business hours in a suit with a restricted bankroll and playing lower-limit games to give him focus. It was the making of the man.

Tabatabai was not the only one to burn BadBeat the way he did, it is just that he has become its highest-profile player. He was the runner-up in the main event of the first World Series of Poker Europe tournament in London last year, pocketing £500,000. He also won R1m (£68,000) in the 12th All-Africa Poker Championship in February this year. But while he is proof of the trading model that BadBeat has developed and refined, he is not even the player who is winning the most cash.

Smith's view now is that the best-performing poker players offer a better return on risk than those dealing in futures. But in percentage terms, the pay-out to a successful poker player is much higher than it is to a trader. Once a player makes $100,000, his split with BadBeat rises to 70/30 in the player's favour. The best BadBeat player will make between $2m and $3m this year for himself. That means he is also raking in profit for BadBeat - and that BadBeat wants to retain him.

The players get half their money at the end of the month and the remaining half at the end of the year. This is to protect BadBeat if and when a player hits a bad run, but it also helps players to control and keep their earnings. Daily loss limits are seen as the cornerstone to developing profitable players. Losing your daily loss limit three times means you move down to playing with half that amount until the poker gods smile on you again. "We have players bankrolled from $50 to $100,000 a day. At these top levels, tens of millions of dollars are gambled a day," says Conroy.

He was answering my question about how big the online poker market is. He doesn't know, in fact, but he's riding the boom and feels sure it is growing. He sees opportunities in parts of the world just starting to embrace the game: Africa and eastern Europe beckon.

When BadBeat was set up, it was Smith's risk-management expertise that shaped, steered and strengthened the business. But Conroy has become a poker visionary, developing an understanding of how players can become winners and how the online market can be exploited. He has also turned himself into a very good player. In July, Conroy won $278,255, after coming third in a big Las Vegas tournament. "I've improved 100 per cent by mixing with lots of players, and living and sleeping poker," he says.

But it is developing the business that interests him most. Players have been bankrolled since poker began, and big US stars have often pooled resources or done deals with rich backers. However, bankrolling has not been attempted before with the same sophistication or scale as BadBeat.

Hedge fund managers and traders are certainly familiar with poker. Manro Haydan trader James Vogl won $400,000 at an event at the 2004 Las Vegas World Series of Poker before concentrating on the financial markets. David Einhorn, president and founder of Greenlight Capital, a US long-short value-oriented hedge fund, finished 18th in the 2006 World Series of Poker main event, winning $659,730. However BadBeat is pretty sure its rivals are not looking to exploit the market directly, and believes it is well ahead of them if they did. The firm has been invited to run trading schemes for online poker sites, an idea that it is considering.

Manro Haydan's offices are at 1 Knightsbridge, an address shared by the National Bank of Abu Dhabi and the Al Jazeera news network. Nestling in a corner is BadBeat's admin and IT squad. It now has 250 traders and is recruiting. There are pros, part-timers, students, home workers - the lot. It looks for online players with trading accounts that prove they can not lose money, and has launched the University Poker League, which promotes online competitions among students, as a way of spotting talent.

The business is testing its training model by paying 50 graduates in Serbia to learn to play from scratch, putting them through an intense poker boot camp. They had to be able to handle basic probability to get selected. "Thirty-five of them were playing non-losing poker within two weeks," says Conroy. "We showed them the cards to play in various positions. It's not rocket science. It's about the discipline and using position." Position is the player's seat in relation to the dealer, and thus his or her place in the betting order, an important tactical consideration.

The Serbians are bright and cheap and if they pass the course they'll be funded to play. A UK boot camp starts this month, and one can imagine BadBeat developing offshore, skilled teams in India, China, Africa or elsewhere in Europe.

Building an army of non-losing players is a way for BadBeat to exploit the online poker system. The fund has two sources of income: players winning money and its share of the "rakes" - the house cut, money online poker companies take for hosting games. BadBeat receives a slice of the rake from all the poker sites its players trade on - so players can make BadBeat money simply by playing and not losing.

. . .

It is the sheer volume of games a trader plays that make this work. BadBeat's key performance indicators are return on risk and the hours its traders work. It wants 40 table hours a week - a lot of games, but if you play two tables at once that's just 20 hours' work in seven days.

The hours a player puts in are also vital to making money. Over time, good players will beat bad players, but luck is a factor. "The one thing employing people to play has highlighted is how little most players play," says Conroy. "Considering it's game of skill and risk, you need to put the time in for the skill to show through." This is why Tabatabai knows he needs to play more hands and stop "running bad". "You have to play more hands to even out the variance. That's pretty much it."

He's short on playing time because his success means he is a sponsored player in live tournaments - sponsored by Betfair, the betting exchange and online poker site. Playing and promotional duties are eating into his online sessions. But he loves travel, and poker has been "amazing" for this.

It would be impossible for Tabatabai to play his 50,000 hands in a month if he didn't multi-table. Poker mission control is the hub of his flat, and his working day revolves around his computer and three 22in flat-screen monitors. He can play up to eight poker tables simultaneously, so there are two screens showing the cards, with the third for web browsing and e-mail. With music on shuffle, breaking the silence but not distracting him, his life is log-on at nine or 10 in the morning then play, play, play, play until six, seven, eight, nine or 10 at night.

Tabatabai, like all the BadBeat players, uses software to keep in touch with his profit and loss account and review and analyse all the big hands he has won and lost to make sure his approach is sound and mathematically correct. Conroy thinks of it as running a technology business. "The big, key differentiator for us, and a barrier to entry for other people, is our technology. The ability to manage and control the players is IT-driven."

All BadBeat's players have a mentor - an experienced player above him or her - to observe. The mentors, in turn, offer advice and occasionally a shoulder to cry on. Within a minute of playing a hand, the details pop up on the mentor's screen. Mentors monitor their players' profit and loss accounts and receive alerts if a losing session or hand has cost more than 15 per cent of a player's daily bankroll. The next stage is to generate alerts if boot-camp players step outside BadBeat's system. Training videos, a database of 10 million hands, and the ability to study opponents "allows us to get a 2-3 per cent edge to the higher players", estimates Conroy.

This kind of monitoring also keeps BadBeat abreast of the way poker is evolving. The huge volume of hands being played online means established responses to certain hands and situations are changing and improving monthly. The internet is a laboratory environment heuristically fine-tuning poker strategy. It is getting harder and harder to be a very good natural.

Tabatabai, struggling with a losing streak, recognises he needs this team and technology behind him. "Now I'm just doing my best to improve and keep up with the next new thing - it's so difficult. You've got all these smart kids across the world giving up prosperous jobs to play poker. Competing with all these people who are using software, different formulas and strategies, I've got to not just keep up with them, but be one step ahead of them."

BadBeat, by its very choice of name, shows a sense of humour and awareness that being the best is not always enough. In poker, a bad beat is when you lose a pot against the odds - a strong hand beaten by a lucky one. The response? You just have to play more hands.

. . .

How much money do you need to play poker?

Poker is the most capital-intensive business in the world. Like banking or securities trading, the commodity is money. The ability to compete is related to what you have, and when it comes to bankroll, most people don't have enough.

The principle is never go broke. Being well-bankrolled means you never play with "scared" money.

BadBeat's John Conroy believes most players (probably 80 per cent) are under-bankrolled. They're also playing at higher stakes than they should. To play $5-$10 no-limit hold'em efficiently you'll need $40,000 to avoid running out of money after a month's bad run, with a daily loss limit of $2,500. At the $1-$2 level you'll need $8,000 with a $500 limit. (The "$5-$10" are just the first, blind bets in each hand.)

If you're an aggressive player who likes to bluff and raise, you may need even more funding. At the $5-$10 level, loose-aggressive BadBeat player Luke Trotman thinks you need $100,000. Most players want to play the highest levels they can, as opposed to levels where they can win money. A few world-class players have better hourly rates when playing $5-$10 than $25-$50.

. . .

A teenage poker champion

Annette Obrestad is not old enough to play poker in Las Vegas, yet the Norwegian teenager is due to play in the World Series of Poker Europe tournament in London this week as reigning champion. A day before her 19th birthday last year, she was sitting in front of £1m, having won the event by beating her good friend John Tabatabai in a showdown.

Tabatabai says that Obrestad knows everything. She feels for him: coming second "sucks". It happened to her later in the year, in Dublin, bringing her live tournament earnings total to $2.8m for the 12 months. She's won nothing like as much at live tournaments this year, although she doesn't talk about her online winnings because of Norway's high tax rate.

She's braced for a tougher tournament this week than last year's, when the good players didn't know her and dismissed her as "a little girl". As a result, she got away with some outrageous bluffs. But the pros respect her now - and they don't respect many female players. She, in the meantime, doesn't think much of the live players who are over the age of 50 and refuse to learn online.

Obrestad puts her chances of winning again at 150-1. Not too good but better than the Lottery. Playing levels are a lot tougher this year than last, but she still feels she's better than most people she sits down with, and is scared of no one.

She's counting down to the day she can play in the Las Vegas World Series of Poker - she will not be eligible until 2010.

The World Series of Poker Europe tournament runs from September 19 to October 2 at The Casino at The Empire, Leicester Square, in London. The buy-in for the main event is £10,000