A betting drawdown is the fall in your bankroll from its highest point to the lowest point that follows, before it sets a new high. You can measure it in dollars, in units or as a percentage of the peak: for example, a bankroll that climbs to $2,600 and then falls to $1,950 is in a $650 drawdown, 650 / 2,600 = 25% below its peak.
The largest fall in a record is its maximum drawdown. A record's finish says whether a method made money; its maximum drawdown says what it put your bankroll through on the way, and whether your stake size can survive the next fall.
How to measure a drawdown
- Record the bankroll after each bet, day or week, with deposits and withdrawals taken out, so only betting results move it.
- Keep a running peak: the highest balance so far.
- Drawdown = running peak - current balance, and as a percentage, that gap / running peak.
- Maximum drawdown = the largest of those gaps. Note how long the bankroll stayed below its peak, too.
Units make drawdowns comparable across bankroll sizes: at $20 a unit, a $650 fall is 650 / 20 = 32.5 units.
A worked drawdown in a hypothetical record
Example: A hypothetical 12-week record from a $2,000 bankroll, staking a level $20 a bet. Not a real result.
| Week | Bankroll | Running peak | Drawdown | Drawdown as % of peak |
|---|---|---|---|---|
| 0 | $2,000 | $2,000 | $0 | 0.0% |
| 1 | $2,180 | $2,180 | $0 | 0.0% |
| 2 | $2,410 | $2,410 | $0 | 0.0% |
| 3 | $2,330 | $2,410 | $80 | 3.3% |
| 4 | $2,600 | $2,600 | $0 | 0.0% |
| 5 | $2,460 | $2,600 | $140 | 5.4% |
| 6 | $2,210 | $2,600 | $390 | 15.0% |
| 7 | $1,950 | $2,600 | $650 | 25.0% |
| 8 | $2,090 | $2,600 | $510 | 19.6% |
| 9 | $2,280 | $2,600 | $320 | 12.3% |
| 10 | $2,540 | $2,600 | $60 | 2.3% |
| 11 | $2,720 | $2,720 | $0 | 0.0% |
| 12 | $2,680 | $2,720 | $40 | 1.5% |
The maximum drawdown is $650, 25.0% of the $2,600 peak, from week 4 to week 7, and the bankroll stayed below that peak until week 11. The record still finished $680 up, 34.0% on the start. Measured from the $2,000 start instead, the week 7 low looks like a $50 dip of 2.5%, which is how drawdowns get understated.
Drawdown and stake size
The same bets at a bigger stake give the same drawdown in units and a deeper one as a share of the bankroll. The record rose 30 units to its peak, then fell 32.5; at other unit sizes from the same $2,000 start:
| Unit (share of the start) | Peak | Low after it | Maximum drawdown | Gain needed to regain the peak |
|---|---|---|---|---|
| $10 (0.5%) | $2,300 | $1,975 | $325, 14.1% | 16.5% |
| $20 (1%) | $2,600 | $1,950 | $650, 25.0% | 33.3% |
| $40 (2%) | $3,200 | $1,900 | $1,300, 40.6% | 68.4% |
| $60 (3%) | $3,800 | $1,850 | $1,950, 51.3% | 105.4% |
Peak = 2,000 + 30 x unit and low = 2,000 - 2.5 x unit. Gain needed = peak / low - 1, the same as drawdown / (1 - drawdown): for a $40 unit, 3,200 / 1,900 - 1 = 68.4%. Doubling the unit more than doubles the percentage gain needed, even though the same 32.5 units of winnings still restore the peak: what grows is how much of the bankroll the fall takes.
Stake share is the part you control: bankroll management covers setting it, and staking a fraction of Kelly is partly about keeping drawdowns shallower, as fractional Kelly shows. Variance in betting shows how deep falls run at your prices; a short record's maximum drawdown is a poor guide to the next, because more bets give a deep fall more chances to happen.
Mistakes people make with drawdowns
| Mistake | What it costs |
|---|---|
| Measuring from the starting bankroll | The 25% fall above reads as a 2.5% dip |
| Counting deposits and withdrawals as results | A $500 top-up hides $500 of losses; a withdrawal looks like one |
| Raising stakes to climb out | More money rides on the same bets, so the next fall is deeper: that is chasing losses |
| Setting no review point | A fall either ends a sound method too early or lets a broken one run on |
Set a review point before you start, such as a 30% fall from the peak; when you reach it, stop and check the method rather than raise stakes. In a betting strategy, the bankroll's job is to outlast falls like these.
Risk: Betting involves risk. The next drawdown can be deeper than any in your record, and smaller stakes only slow the losses of bets that have no edge. See responsible gambling for limits and support.
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