The pitfalls of Gambler’s Fallacy

Remember the randomness

Money Management & Betting Systems

You have probably heard of the phrase Gambler’s Fallacy if you have been doing betting and especially so if you have been looking at trying to follow a betting system. Our important start to this article has to state that Gambler’s Fallacy is a real thing. Don’t dismiss it, because it is something that needs attention paid to it because it can help you.

Punters getting swept up in Gambler’s Fallacy can often and rapidly fall into a black hole of losses because of a skewed perception of chance. All bets are random basically and what has gone before, the results you have had in previous bets will not in any way influence what is going to happen in your next one. Let’s take a deeper look.

Gambler’s Fallacy – what is it?

Fallacy, simply put is a mistaken belief. When it comes to betting this can lead to poor choices and unfortunate circumstances. The biggest notion of Gambler’s Fallacy is this – that if you have lost a series of bets, your chances of winning the next one will increase. Think of the old chestnut about flipping a coin. You flip five ‘Heads’ in a row so Gambler’s’ Fallacy creeps in and you think that by the law of averages that you have a bigger probability of a “Tails” coming up next.

So you put a big bet on “Tails” only in your disbelief, to see another “Heads” come up. That is somewhat flawed thinking because regardless of those preceding five “Heads” in a row, you are still flipping a coin at 50/50 chance. The probability of a “Tails” coming up has not changed, it has not altered from any of those other films of the coin. This issue is escalated and further skewed when you have money riding on it. If you have lost a stake on each of those first five coin flips then you are going to be desperate to recuperate some losses.

Chasing losses can lead to emotional betting, panicked betting and irrational betting. At that point, you may easily forget that there is always a 50/50 chance on a coin flip and that will never change (unless you are playing with a doctored coin of course). Our scenario works the other way too, you can get blinded into thinking this streak of “Heads” is just going to continue and continue where again, there is just as much chance of the opposite result coming up. You can’t control randomness.

Variance

Variance is a factor in all of this can lead to some more misperceptions about what is happening especially because the number of bets that you place isn’t likely to huge enough to diminish the factor of variance.

The probability on the outcome of one single coin toss is always 50/50. But if you were to flip that coin 100 times then it is highly unlikely that you would get “Heads” 50 times and “Tails” 50 times. You may end up 75 for one and 25 for the other, or any kind of variation on that.

Why you don’t get that 50/50 split in terms of results highlights randomness again and this variance factor. Variance is the straying away from averages. Randomness doesn’t always end up following averages, especially over smaller occurrences, say of ten bets or ten flips of a coin. Let’s expand on that a bit.

You may expect 100 tosses of the coin to produce some kind of number that is even in terms of how many of each result that you get. But you will always get this variance away from what on average, is expected to happen. But here is where this gets really fun.

The more times you toss that coin, the lessening the effect of variances becomes. If you tossed the coin 1000 times then you likely see more of an even number of results happening. If you were to do it 100,000 times then you would likely get closer to the average number of the 50/50 split. Get up to a million and you have decreased the effect of variance.

So it is the probability that takes over the more times that you toss a coin. Think of it this way, if you tossed the coin just ten times you may get a 7-3 result. That is because the variance away from the average is going to be exaggerated with fewer flips. If you would go up to say a 1,000 flips of that coin, probability takes over, sending the results to more of an even outcome.

Random is Random

You cannot be certain of anything on the outcome of a sporting event, coin flips, spins of a roulette wheel. None of it. It’s all random. This is so important to remember each and every step of the way in your betting because the proceedings result of a bet (which was random) has no effect on your next bet. But punters often forget this and think that winning streaks will continue or that losing streaks will come to an end.

Fallacy and Progression

You will most likely see the Gambler’s Fallacy happen in losing streaks more so than just expecting winning sequences to continue. Negative progression systems are where you keep doubling up on stakes after a loss until you hit that win to make everything right again (at even money betting options). You can see where Gambler’s Fallacy comes into this because the flaw of such progression systems is that the losses may continue until you run out of money to cover the next stake. You are basically putting your trust in the expectancy that a losing streak will end next because of all those losses that have preceded it. Randomness doesn’t work like that.


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