Glossary · Risk

Drawdown

The peak-to-trough decline in bankroll during a losing run.

Drawdowns are unavoidable. A profitable strategy can still see 20–30% drawdowns within a season. Knowing your worst historical drawdown — and being able to stomach it — is the difference between a bettor who survives variance and one who quits at the bottom.

Variance— The natural swings around your true expected value. Bigger edges have smaller swings; longshots have huge ones.
Bankroll— The pool of money set aside exclusively for betting. Never your rent.
Sharpe Ratio— Risk-adjusted return — how much profit you earn per unit of volatility.