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Quote:

Originally Posted by UselessBettor

Paul,

If you can accept 40% drawdowns then your a much more risk accepting punter then me. I prefer a maximum of 5%.

My issue with a higher drawdown is for my own mental health.

Its because of the numbers below:
A drawdown of 40% on $100 is only $40. <- Most people can handle this easily.
A drawdown of 40% on $1000 is only $400. <- Most people can handle this for short periods providing the bounce back is quick.
A drawdown of 40% on $10,000 is $4000. <- Most people can not handle this even with a quick bounce back.
A drawdown of 40% on $100,000 is $40,000. <- 99.9% of people can not handle this without affecting their health and mental state.
A drawdown of 40% on $1,000,000 is $400,000. <- 100% of people can not handle this at any stage.

At 5% the numbers are a bit different :

A drawdown of 5% on $100 is only $5. <- Everyone can handle this easily.
A drawdown of 5% on $1000 is only $50. <- Most people can handle this easily.
A drawdown of 5% on $10,000 is only $500. <- Some people can handle this easily, others will not.
A drawdown of 5% on $100,000 is only $5K. <- Less than 20% of people will probably be able to handle this loss.
A drawdown of 5% on $1,000,000 is only $50K. <- Less than 10% of people will probably be able to handle this loss.

Its all about the size of the loss. Losing 40% of a small number is nothing when people compare it to their wages and other spending they do. When they lose 50K its much different.

As I progress building my bet sizes I can now take losses easily in the thousands but its a learned state of mind and it takes time. If I had to also contend with 40% of my bank gone I would be a mental wreck.

For smaller punters (who have a bank less than $1K) then a higher drawdown is probably acceptable, but do you think a punter should lower their drawdown % as their bank grows ?

HI UB,

I understand the point you are trying to make and it certainly does have some relevance however I can't agree with that line of thinking. If your maximum risk threshold is set at 5% then so be it. I'm certainly not trying to influence what you should do. It is true though that very few understand the realities of betting in the context of adequate bankroll management even though much has been written on the subject.

Yo answer you question, "do you think a punter should lower their drawdown % as their bank grows ?"

The answer is it depends on whether they continue to reinvest profits or whether they withdraw them on a regular basis. For our team we treat each month as a settlement period in that if we have made money we deduct expenses and distribute the remainder of the profits to the trading partners. If a punter doesn't require the funds to be withdrawn then over time the bank will grow so that the same percentage draw-down takes on greater significance as you have highlighted. I suppose you would then look to reduce the percentage.

One tool we do employ is that we recalculate our bank each day to account for wins/losses and size our bets based on that figure so that we stake relatively on what the bank is doing. Other syndicates do similar.

Hope that helps.