Definition
Why expected P/L differs from actual P/L
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Definition
Expected P/L is what a strategy should earn on average across many repetitions of the same situation; actual P/L is what it earned in one realization. Variance can push actual P/L far from expected for surprisingly long.
For a strategy betting at +5% edge, the expected return on $100 staked is $5. The actual return on a single bet is either +$x or −$100 depending on outcome. Across 100 bets, actual converges toward expected; across 1,000 bets, it converges more tightly. Most operators underestimate how many bets it takes — the standard error around expected P/L is huge over small samples.
How long until actual converges
For a strategy at +2% edge with typical variance, you need ~3,000 bets to be 95% confident actual exceeds zero. Most strategies don’t place that many bets per year. Hence why CLV beats P/L as a quality signal — CLV converges faster.
The trap
A strategy with a real edge can lose for 6 months due to variance. A strategy with no edge can win for 6 months due to variance. P/L alone doesn’t distinguish — CLV does.