Drawdown and strategies in sports betting: everything you need to know

The concept of drawdown has been widely used in the financial field. It is known as the yield curve in this sector, and is used to analyze a given investment strategy.

Something similar happens in sports betting, where the drawdown is used to measure the lost winnings compared to the maximum winnings obtained in a specific period of time.

What is the purpose of analyzing this data? To measure the risk of, for example, following a tipster, something that allows us to quantify the drop in the heat of our accounts in the least favorable moments. That is why drawdowns are widely used when choosing the best tipster, and can be an indication that it may be advisable to change to seek a higher return on the forecasts.

Drawdown: definition and basic characteristics

Now that you know what is drawdown in betting, it is time to analyze the types of drawdowns that exist. Yes, in sports betting there are two different types of drawdowns: the current DD and the max DD.

  • Current DD. The current drawdown refers to the lost winnings that a tipster has today, so only the values of the same day are taken into account.
  • Max DD. The "max drawdown" refers to the maximum total amount of lost winnings that a tipster has had, taking into account for the calculation all his betting history. It is the most current type of drawdown when it comes to obtain references of a tipster, since it allows to check his historical data.

This means that the values of the current DD are always lower than those of the max DD, since the time intervals studied are different. It is important to put the data in perspective, taking into account the time span and the historical variations.

How knowing the drawdown can benefit your betting strategy

Although attempts have been made to reduce the presence of tipsters in bookmakers, their presence is still constant, and certain user profiles find it helpful to have the support of a specialist to guide their bets.

Calculating the drawdown is a good way to get references of a tipster and know what is the variance of the maximum and minimum values, both throughout his career and during the day, which gives a sample of the tipster's performance throughout his career and his performance during the day.

Analyzing a tipster is always beneficial, because by following him we will take him as a reference when making our forecasts. Although it is a good reference, the drawdown data should not be taken as if it were a predictive tool, since the calculations are based on results that do not take into account the circumstances that led the tipster to obtain them.

In other words: it only analyzes isolated data, without including other determining factors that may have a lot of weight when explaining the origin of the results. In addition, it should be taken into account that the volume of losses has a lot to do with the average stack handled, a data that drawdowns do not take into account and that is important to understand how much has been paid for the bet and why certain losses have been generated.

Is it necessary to adjust the stake if we calculate the drawdown?

Absolutely. One of the ways for the user to mitigate the possible negative impact of his failed predictions is to readjust his stack if the drawdown value reflects a figure that is too far away from what is considered acceptable. This is the best way to mitigate possible losses and to keep the funds used for betting safe.

It is important that each user adapts his stake to the max DD, the drawdown that reflects the historical data. In this way, the risk is contained and the stop-loss can be used if 50% of the max DD is exceeded, thus reducing the risk of further losses.

However, each user can apply the stop-loss on the scale he/she considers appropriate, depending on his/her level of aggressiveness and the risk he/she is willing to take. Once the stop-loss to be applied is clear, the stack can be adjusted according to the capital.

Although it is not premonitory, calculating the max DD allows you to know the approximate maximum stack limits to be used per bet. Exceeding them means incurring losses, and not reaching them prevents you from taking full advantage of the bet.

A crucial aspect of max DD is that it allows to identify, during a bad streak of results, whether they are within the expected range, or if they are an extraordinary problem that requires urgent solutions. All betting amateurs usually know what tilt is at some point in their careers, so it is relevant to have the ability to know whether the errors remain within the expected values or are more serious than originally thought.

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