The Gambler’s Fallacy

I’m super chuffed that  I posted the early season trainer angles on Monday!

I couldn’t have chosen a better day to point out the merits of the ‘Spring Training Masters‘ as their performance since has shown:

Roger Charlton: From 2 runners –  a winner at 20/1 and a 3rd at 15/2

Ralph Beckett: No runners as yet.

Alan King:  1 runner –  3rd at 16/1

I love it when a plan comes together!

On to today:

The Gamblers Fallacy

coin-toss-199x300Here’s a scenario:

You’ve just watched me flip a coin 10 times. On every one of those 10 flips, the coin has come up heads. I know it seems unlikely but it can and does happen (If you were to toss a coin 1000 times you would have a 62% chance of at some point hitting a run of 10 consecutive heads)

After determining that the coin is a genuine, non -trick coin, (it is),  I’ve now got a question for you:

When I toss the coin for an 11th time, which is more likely to come up? Heads or Tail?

Well, the correct answer is neither is more likely.

Each coin toss is an independent event, entirely uninfluenced by the result of those that preceded it and those that come after. Neither heads nor tails is more likely – they both have a 50% probability regardless of what has gone before.

If you answered that either heads or tails was more likely, then you are falling prey to The Gamblers Fallacy- and it could well be costing you money.

The Gambler’s Fallacy is defined as:

‘the mistaken belief that if something happens more frequently than normal during some period, then it will happen less frequently in the future; likewise, if something happens less frequently than normal during some period, then it will happen more frequently in the future (presumably as a means of balancing nature). In situations where what is being observed is truly random this belief, though appealing to the human mind, is false. This fallacy can arise in many practical situations although it is most strongly associated with gambling where such mistakes are common among players.’

The most common problem that arises when you fall into this way of thinking is chasing losses and increasing stakes because you’re “due a winner”.

It’s so  easily done – I know, I’ve been there!

When you’ve had a series of losers (and they are always unlucky losers!) you start to think, the next one must come in, I’m due a winner after all this bad luck, the law of averages says this has to turn around shortly blah blah blah.

You need to avoid this kind of thinking at all costs!

Always keep in mind that your selections don’t know that you have been losing more often than you would expect from your long term strike rate.

Don’t fall victim to the Gamblers Fallacy – it’s been the ruin of many, many brave punters!

 

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7 Responses to The Gambler’s Fallacy

  1. Gordon Coles says:

    Hi Kieran,

    I have heard this so many times, but still can’t get my poor little head around it.

    I totally get the point about each spin being an individual event, but, when looked at in a long sequence of identical events, what about the law of Probability??
    Surely, after a sequence of 10 heads or tails, or more, the law of Probability says that a change must be due???

    As you can tell, I really do struggle with this one, and despite the logic of what you say, I think a lot of people will struggle as well, human nature will see to that, as it simply doesn’t appear to make sense, despite the logic!LOL

    All that said, I definitely do not chase losses, I can at least resist that suicidal temptation:-)

    Cheers
    Gordon

     
    • Kieran says:

      Hi Gordon

      Thanks for your comment.

      I agree it can be a difficult one to get your head around. However, it is most definitely true!

      I guess it doesn’t really matter if we understand why it’s the case – what’s important is that we know it to be true and behave accordingly (which it appears you do from your no chasing policy)

      Best

      Kieran

       
  2. Mister Viv says:

    Gordon, when the coin is ready to flip, it is unaware of it’s past and unaware of it’s future- it may as well be the very first time it has been flipped. All settings are at zero. There must be thousands of gamblers out there who have fallen victim to the ‘odds on Black coming up nine times in a row are 654 to one’ and use the martingale system to recoup their losses, only to find they’re skint in an hour. It happens. I’ve played online roulette (free games) out of boredom and seen it happen frequently.

     
  3. tammy says:

    This is something I always thought but never practiced. What would you do in this situation then? I average about 35 to 40 per cent winners however it depends on the day I am having. All horses are like lottery balls. They do their job. They dont memorise when they win or lose. Also horses like us can have a bad day. I seem to like picking these horses some days. How can we avoid losing all our betting bank if they all decide to underperform for that day? I like to bet a fifth of my bank on a race until one wins. I enjoy a gamble but would love for it to start paying off. At the moment I have good days when I am really on top but the days when they dont win, wipes me out even though I stick to my budget. Please could you help thankyou

     
    • Kieran says:

      Hi Tammy

      Thanks for your comment.

      The problem I can see with your strategy is that you are staking far too aggressively.

      You have a method with a 35-40% strike rate – let’s call it 40% for ease.

      With a strike rate at that level, in each 1000 bets you are likely at some point to hit a losing run of 14. Naturally with your 5 point bank you will go bust long before you get anywhere near that – I would have thought you are almost certain to go bust in your first 40 or 50 bets.

      With a 40% strike rate you should be staking from a bank with a minimum of 40 points and preferrably more. That way you have enough of a cushion to cope with the losing runs you are certain to ecounter. That’s assuming, of course, that your selection method has a genuine edge!

      Hope that helps

      Kieran

       
  4. tammy says:

    Thankyou. I never could work out what I was doing wrong. I will definately try using your banking method. Have researched betting banks and points but found it so confusing. You are the only ones who have explained in laymans terms what I actually need to do. Thank you so much. Lets see what happens now. :-)

     
  5. Gordon Coles says:

    Hi,
    As I said, I fully understand the bit about each coin toss being a separate event, and that it doesn’t know what has gone before, but surely it is far more complicated than that?

    There are all sorts of other “laws” that come into play, the “law of probability” the “law of averages” etc. Yes there can be huge long runs of heads or tails, or red or black, but, I find illogical to argue that the longer the run of one result, the more the “likelihood” of the other result occurring increases?

    I would also suggest that the flip of a coin is a 50/50 event, and that to apply the same principle to operating a horse racing system, or selection process, doesn’t work. We are always told that we need to embrace the losers, as it puts us a step closer to the next winner…….

    I would simply ask this, if you were watching a roulette table, and had to bet on red or black, and red had come up 20 times in a row, which colour would you put your money on??

    Good luck,
    Gordon

     

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