Standard Deviation
Definition
Standard deviation is the square root of variance and quantifies the typical size of swings in your betting results. It is expressed in the same units as your returns (dollars or units), making it more intuitive than variance for assessing risk.
Formula
SD = sqrt(Variance)Example
If your average profit per bet is $5 with a standard deviation of $40, roughly 68% of your bets produce results between -$35 and +$45. A 2-standard-deviation losing streak ($5 - 2x$40 = -$75 per bet average) is uncommon but expected occasionally.
Related Terms
Monte Carlo Simulation
StatisticsMonte Carlo simulation is a computational technique that uses random sampling to model the probability of different outcomes. In betting, it simulates thousands of possible bankroll trajectories based on your historical edge and variance to estimate risk of ruin, expected growth, and confidence intervals.
Variance
StatisticsVariance measures how widely your betting results spread around the expected value. High variance means large swings (common with longshot bets at high odds), while low variance means more predictable results. Understanding variance helps set realistic expectations and avoid tilt.
Sample Size
StatisticsSample size refers to the number of bets in your track record. In sports betting, small samples are dominated by variance and tell you very little about true skill. Statisticians generally recommend at least 500-1,000 bets at similar odds ranges before drawing conclusions about edge.
Risk of Ruin
StatisticsRisk of ruin is the probability that a bettor will lose their entire bankroll. It depends on edge, variance, and bet sizing. Aggressive staking (high % of bankroll per bet) dramatically increases risk of ruin even with a positive edge. Proper bankroll management keeps risk of ruin acceptably low.
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