Sports Betting Drawdowns: Surviving the Brutal Math
Never confuse an improbable event with an impossible one
By JV Miller | Professional Sports Bettor & Publisher, ProfessionalGambler.org
The Brutal Math of a Winning Sports Bettor
Here's one of the hardest things for a serious sports bettor to accept:
You can be a winning bettor and still spend most of your time below a previous bankroll high.
That sounds contradictory. It isn't.
In fact, understanding that single fact may be one of the most important differences between someone who survives long-term sports betting and someone who abandons a profitable approach because he becomes convinced that something has gone wrong.
Your Bankroll Is Not an Escalator
Most bettors have an unconscious picture of what successful sports betting is supposed to look like. If they have an advantage, they expect their bankroll to behave something like an escalator:
Up. Up. Up. Up.
Maybe an occasional step backward, but generally a steady climb. That is not how a betting bankroll behaves. A better picture is a man climbing uneven stairs on a pogo stick. He may ultimately reach the next floor, but the trip is going to involve an awful lot of bouncing up and down along the way.
That's variance. And the smaller your advantage, the more brutal those fluctuations become.
A Winning Expectation Does Not Mean You Usually Win
Suppose for the moment that we have a bettor with a legitimate long-term advantage. That tells us something about what should happen over a sufficiently large number of wagers. It tells us very little about the order in which those wins and losses will arrive.
The bettor might go:
W – L – W – W – L – L – W – L – L – L...
Or:
W – W – W – W – W – L – W – L...
Or:
L – L – L – L – L – L – W – W...
The long-term mathematics can be identical. The experience of living through those sequences is anything but identical.
That is why a bettor can possess a genuine mathematical advantage and still experience losing streaks, losing weeks, losing months and substantial drawdowns from previous bankroll highs. A positive expectation and a smooth bankroll are two entirely different things.
The Green and Red Marbles
Here's another way we've explained this for years. Imagine a large sack containing 100 marbles: 55 green marbles for winning bets and 45 red marbles for losing bets.
Your job is to reach into the sack without peeking and pull out one marble. Record which color you selected. Place the marble back in the sack. Shake the sack and pull out another marble. Repeat.
Even though there is a 55% chance that you will pull out a green marble every time, there will be periods in which you pull out more red marbles. It's just the probabilities of the situation.
Believe us, those red marbles can be a real pain in the patootsie.
The Most Dangerous Part Isn't the Losing Streak
The mathematics are only half the problem. The other half is the bettor. After enough red marbles, people start changing things. They increase their wagers because they want their money back. They decrease their wagers because they're frightened. They abandon strategies that were working. They start betting games they ordinarily wouldn't touch. They switch handicapping methods. Or they simply quit.
Which leads to one of the most important lessons we've learned from decades of doing this:
The most likely person to stop you from drawing from the sack is you.
The mathematics don't know that you've lost six bets in a row. The next wager doesn't know either. But you know. And that's what makes the mathematics of a professional betting bankroll so brutal.
The 95% Rule: Sometimes Winning Doesn't Feel Like Winning
Now let's put some mathematics behind what we just described.
Years ago, while working through the probabilities involved in professional sports betting, we discovered something that initially seemed almost impossible:
A profitable bettor can spend the overwhelming majority of his betting life below a previous bankroll high.
We came to call this the 95% Rule:
History of 95% Rule
Imagine recording your bankroll after every wager and asking: “Am I at a new all-time high right now?” For a bettor with only a modest mathematical advantage over the market, the answer can be NO an astonishing percentage of the time. That's because setting a new bankroll record is a much higher hurdle than simply winning the next bet. You first have to recover every dollar lost since the previous high. Only then can the bankroll establish a new record.
We brought in academics to check our math
While doing research for our book, How Professional Gamblers Beat The Pro Football Pointspread, we enlisted the help of Dr. Jeffery Allbritton, Professor of Mathematics, Middle Tennessee State University. He double-checked the math in the book, including our findings concerning the probabilities involved not only when dealing with team statistics and predicting winners, but even more importantly, when dealing with bankroll management.
My research made it clear that the use of a correct bet size is every bit as important as the ability to predict winners. Make no mistake about it, the failure to use correct bankroll management will put you out of the sports betting business even faster than a failure to predict winners.
It is safe to say that less than one in one thousand sports bettors is aware of this extremely important 95% Rule.
The 95% Rule is: Even with a 55% winning percentage, you will have less bankroll than you've had at one time or another in the past more than 95 percent of the time.
That's right -- less than 5 percent of the time can we expect to set new all-time highs with our bankroll.
This means 19 out of 20 days, you will be under your all-time peak high.
It is essential to our well being that we recognize this fact. Like it or not, we must accept that such a condition exists, and that it is wholly normal. It is dictated by the mathematics of the situation. By recognizing and accepting that this condition exists, we can better deal with that nagging feeling of having to 'do something' to catch up. Even if we're showing a profit over the last couple of months, if our bankroll is less than it was last week, we tend to get that knot in the pit of our stomach that reminds us we've been losing.
That knot in our stomach is not conducive to clear thinking. It is the first step to a feeling of desperation.
The line chart below shows a "typical" 26-week period. Red dots indicate a new peak in bankroll. Notice, in half a year (26 weeks), a new peak in bankroll happened only ten times (red dots).
Bankroll growth chart
"Typical" bankroll growth over 26-weeks. Red dots indicate new peaks in bankroll. Notice there are only ten. This means most weeks your bankroll will be less than a previous peak.
It would be wonderful if our bankrolls increased predictably and smoothly, week-by-week, but that is simply not the way it works. We are not dealing with an escalator moving smoothly and predictably upward; we are dealing with a pogo stick bouncing crazily up a long, uneven grade. Less than one 'bounce' in twenty of our pogo stick will result in a new all time 'altitude' record.
The important thing is to recognize that the condition exists, and that it is simply not avoidable, and to accept it as being part of the overall picture. If you are aware that this circumstance is supposed to happen you will be better prepared to cope with it on an emotional level.
The 95% Rule: Sometimes Winning Doesn't Feel Like Winning
If the 95% Rule sounds brutal, losing streaks can be worse. One of the great psychological traps in sports betting is believing that a long losing streak is evidence that a winning method has stopped working. Sometimes it is.
But sometimes you've simply pulled a whole bunch of red marbles out of the sack. And I have seen just how ugly that can get.
Tony Diamond Lost 27 NBA Bets in a Row
In 1997, Las Vegas sports handicapper Tony Diamond went through one of the most extraordinary losing streaks I have ever witnessed. Diamond was no amateur. Before the streak began, he had been having an outstanding NBA season.
Then he lost. And lost again. And again. By the time it ended, Tony Diamond had lost 27 consecutive NBA selections.
Think about that from the bettor's perspective. After five consecutive losses, you're irritated. After ten, you're wondering what the hell is happening. After fifteen, you're questioning everything. After twenty, it becomes difficult to believe that the next bet could possibly lose too. And then it does. Twenty-seven consecutive losses.
A mathematics professor who examined the streak at the time calculated the odds against it at approximately 4.5 million to one. That's an extraordinary number.
“Unlikely” Does Not Mean “Impossible”
This is where people routinely misunderstand probability. If something has only a one-in-a-million chance of occurring, that does not mean it cannot happen. It means that, under the assumptions producing that probability, it should happen approximately once in every million opportunities.
And professional bettors create an enormous number of opportunities for unusual sequences to occur. Hundreds of bets become thousands. Thousands become tens of thousands. Years become decades. Eventually, you are going to see things that would have looked almost impossible before they happened. That's why I'm always cautious when somebody tells me: “There's no way I could lose that many in a row.”
Oh yes, there is.
We Learned That Lesson Ourselves
My father, J.R. Miller, and my uncle, R.J. Miller, received our own education in what probability can do to a sports bettor. In 1985, they went 0–13 on an NFL card.
Thirteen bets. Thirteen losses. Not one winner.
It was the kind of week that forces you to confront a very uncomfortable question: How can somebody who knows what he's doing possibly lose every single bet?
The answer is that handicapping skill can influence the probability of winning an individual wager. It cannot dictate the sequence in which the wins and losses arrive.
That miserable 0–13 week ultimately became one of the reasons we began looking much more seriously at the mathematics behind losing streaks and bankroll management. We wanted to know what kinds of sequences a professional bettor needed to be financially prepared to survive—not merely what we hoped would happen.
Your Bankroll Has to Survive the Unthinkable
That's the practical lesson. A money-management strategy designed around normal-looking results isn't much of a money-management strategy. The dangerous sequence is precisely the one you didn't expect.
Seven losses. Ten losses. Thirteen losses. Or, in Tony Diamond's extraordinary case, twenty-seven.
You cannot control when the red marbles come out of the sack. You can control whether you've constructed your betting operation so that you're still standing when the green ones finally start coming out again.
Scale your bet sizes so you'll be alive in January. Because the mathematics don't care whether the losing streak you're experiencing seems reasonable. And neither does your bankroll.
You Can Be Winning and Still Get Crushed by a Drawdown
The most dangerous losing period isn't always the one that begins when you're already losing. Sometimes it begins when you're doing great.
We learned that lesson particularly well during the 1998 NBA season.
We Were Up Approximately 53 Units
At one point that season, our NBA selections had climbed to approximately +53 units. That's the kind of run everybody wants. Subscribers are happy. Confidence is high. The bankroll is growing. And that's precisely when a new danger appears.
People begin thinking the current pace is normal. A bettor who started the season cautiously begins looking at all that profit and thinking: I'm playing with house money now.
Or:
If I'm making this much betting $500 a game, imagine what I'd be making betting $1,000. So he increases his wagers.
Then the pogo stick changes direction.
We Gave Back Approximately 24 Units
From around March through the playoffs, we went through a brutal stretch and gave back roughly 24 units from our previous high. We had been approximately +53. We finished around +29 units. Read those numbers again.
We finished the season up approximately 29 units.
It was a profitable season. But from the perspective of somebody standing at the +53-unit peak, the rest of the season felt like a disaster.
That's a drawdown.
The bettor didn't experience: “I made 29 units.”
He experienced: “I had 53 units of profit, and now I only have 29.”
Mathematically, those are descriptions of the same ending. Psychologically, they aren't even close.
Some Bettors Managed to Lose During Our Winning Season
Here's where it gets painful. Some subscribers had become overly optimistic during the winning run and increased their wager sizes.
Then the drawdown arrived.
Because they were betting larger amounts during the losing portion of the season than they had been betting during the winning portion, their personal bankroll results could be dramatically worse than the performance of the selections themselves.
Some went broke. Think about the absurdity of that. The picks finished profitable, but the bettor didn't. The problem wasn't necessarily which games he bet. The problem was how much money he bet on them and when he changed the amount. That's one of the reasons my father and I became so adamant about disciplined money management.
You can follow profitable selections and still lose money through bad money management.
Don't Let a Hot Streak Rewrite Your Business Plan
Losing streaks scare bettors into doing stupid things. Winning streaks can make them do stupid things too. After a long winning run, the bankroll feels bigger. The edge feels stronger. The next game feels easier. None of those feelings changes the probability of the next wager.
A hot streak is not permission to abandon the money-management plan you established before the hot streak began. This is exactly why we don't arbitrarily increase our wagers after a good week, a good month or a spectacular run.
Our rules for changing wager size are established before we know whether the next ten bets will be winners or losers. That's the job of the Miller Flat Betting System, which we explain separately.
Ultimately, there are lots of concepts to proper bankroll management. These concepts intertwine, overlap and are connected. To understand the relationships between these concepts, bookmark and read our article Sports Betting Money Management: Professional Bankroll & Staking Strategies
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The Millers of Las Vegas
The Real Deal in an Industry of Phonies.
J.R. Miller, KLAS-TV, 1985
J.R. Miller with legendary sports bettor and author Bob McCune, 1995
J.R. Miller and professional sports bettor and brother R. J. Miller, Las Vegas desert, 1980
J.R. Miller hosted seminars on sports betting. This pictrure was taken at the Tropicana in Laughlin, Nevada.