Streaks and drawdowns

A drawdown is the drop between your bankroll's highest point and the lowest point that follows. It's the most concrete measure of a strategy's "pain".

A winning bettor spends a lot of time in the red

People often imagine that a bettor with value sees their bankroll rise steadily. The reality is very different.

Losing streaks

With a probability of winning $p$, the probability of losing $k$ bets in a row from a given point is $(1-p)^k$. But over a long history, long streaks become almost certain:

Key takeaways

1. Don't judge a strategy over a few weeks. A month of losses proves nothing.
2. Don't change your method during a drawdown without an objective reason.
3. Size your stakes so that the worst reasonable drawdown doesn't exceed what you can handle, financially and mentally.