What 'Return on Wager' Actually Measures
ROI is the wrong yardstick for speculative decisions. Return on Wager treats each wager as a portfolio allocation.
Most speculators measure performance the way a casual investor measures a savings account: total dollars in versus total dollars out. That number tells you nothing about whether you played the game well. Two traders can post identical year-end P&L while one of them was reckless and one of them was disciplined. Luck simply landed differently.
Return on Wager (ROW) reframes the question. Each individual speculative position is a unit of capital deployed against a thesis. The number that matters is not whether *this* position printed, but whether the decision to take it was a good decision *given what you knew*. ROW measures three things in parallel: edge (was the implied probability mispriced?), sizing (did the position fit the conviction?), and process (did you write the thesis down before you acted?).
The practical effect: a $200 loss on a 2% position with a clear thesis scores better than a $500 win on a 30% position with no thesis. The former is repeatable. The latter is a coin flip you got lucky on.
ROW is not a prediction engine. It is a discipline engine. Used correctly, it makes you smaller, more selective, and harder to tilt.