A suggestion which is borne out by the max drawdown calculation. A simple glance at the graph is enough to suggest that this represents a markedly more volatile system. In Betting System 2, the end result may be the same (33 units profit over the period) but the path to that result is very different.
This system therefore has a max drawdown of 7 units. Our Max Drawdown here occurs between the peak at a profit of 21 and the subsequent dip to 14. Let’s look at a couple of profit and loss graphs to illustrate the concept.īetting System 1 represents a relatively stable betting system.
#Find max drawdown in excel series#
It is defined as the biggest difference between a highpoint in a series of results and a subsequent low point. Provided we have historical data relating to a betting system, max drawdown is in fact relatively easy to measure. How bumpy a ride are we in for? This is where max drawdown comes in, but how do we ascertain it’s value? It is certainly useful to know in advance what kind of losing runs can be expected from a particular betting system. However, not all losing runs are created equally. Much as we wish they weren’t, losing runs are an inevitable aspect of following a betting system. In betting terms, it is essentially a measure of the maximum downswing we can expect to experience when following a betting strategy over time. The higher the max drawdown figure the greater the potential volatility and vice versa. In simple terms max drawdown can be thought of as a measurement used to define the risk and volatility associated with an investment or betting strategy. The world of stocks and shares may be where the concept originated, but like much from the world of trading, max drawdown can also be utilised as a significant tool in our betting armoury. How familiar you are with the term max drawdown, will largely depend on your levels of exposure to the financial markets and related stock investment systems. Betting Strategy – Understanding Drawdowns How Drawdowns Affect Your Betting
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