Variance in Betting: why good bets still lose (and how to survive downswings)

A guide to variance, losing streaks, bankroll sizing and Kelly. Learn what to expect and how to keep your bankroll alive.

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TL;DR

  • Even great (+EV) bets lose often — variance creates streaks.
  • Judge performance by long-term EV & CLV, not one week of results.
  • Use fractional Kelly (e.g., 0.25–0.5×) and expect drawdowns.
  • Plan risk with the Max Drawdown simulator before you scale up.

Related: EV Calculator • Kelly Calculator

1) What is variance — in one minute

Variance is the natural randomness around your expected value. With a small edge (e.g., +1–2% EV), outcomes bounce up and down a lot. You can be a good bettor and still run cold for weeks.

Key point: short-term results are noisy; long-term edge shows up only over hundreds or thousands of bets.

2) Why streaks happen (simple examples)

  • Fair coin, 50/50: long losing streaks still happen. In a few hundred flips you’ll regularly see 6–8 losses in a row.
  • Small edge, 52% at 1.95: EV ≈ 0.52×1.95 − 1 = +1.4%. You still lose 48% of bets — strings of 6–9 losses are normal over a season.
  • Long-shots: higher odds = bigger swings. A 4.00 price wins rarely; droughts can be long even if EV is positive.

3) Bankroll & stake sizing that survives reality

Size your bets so a normal downswing doesn’t kill the bankroll or your mindset.

  • Kelly (2-way): f* = (b×p − (1−p)) / b, where b = odds − 1. Start with 0.25–0.5× Kelly and cap per-bet exposure.
  • Be consistent: size bets as a % of bankroll, not fixed cash, so risk scales up/down automatically.
  • Simulate first: run your plan in the Max Drawdown simulator to see “ugly but realistic” scenarios.

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4) Drawdown: the risk you actually feel

Drawdown = the largest peak-to-trough drop in your bankroll curve. It’s the number that decides if you keep going or quit early.

Two strategies with the same EV can feel very different: the one with lower drawdowns is easier to stick with. Use the simulator to check how stake % and Kelly divisor change typical and worst-case drawdowns.

5) What to expect from +EV betting

  • Win rate < 60% is normal for many markets. Don’t equate “good” with “win almost every bet”.
  • CLV matters: if you regularly beat the closing line, variance is the likely culprit when ROI dips.
  • Sample size: judge strategies over hundreds of bets. A 50-bet downswing doesn’t mean the edge is gone.

6) Practical checklist

  1. Estimate fair probabilities (de-vig) and bet only when EV ≥ 1–2% on liquid markets (EV Calculator).
  2. Pick a Kelly fraction (0.25–0.5×), set a unit cap, and round stakes sensibly (Kelly Calculator).
  3. Run the Max Drawdown simulator with your EV%, hit rate, and stake % to preview pain.
  4. Track ROI, CLV and drawdowns. If CLV is positive but ROI lags, keep the faith and the sample size growing.
  5. Avoid tilting: don’t raise stakes to “win it back”. Follow the plan you simulated.

FAQ

“I’m +EV on paper, why am I down money?”

Because variance. Small edges need large samples. Check CLV: if you beat closing consistently, your process is likely fine.

How big can a normal losing streak be?

With ~52% hit rate, strings of 6–9 losses are common over a season. Long-shot styles can see much longer droughts. Plan for it in your stake size.

Should I ever use full Kelly?

Only if your estimates are very accurate and you can tolerate deep drawdowns. Most bettors use half- or quarter-Kelly to reduce volatility.