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Understanding the Gambler's Fallacy: A Guide to Better Betting Choices

Understanding the Gambler’s Fallacy: Why Luck Doesn’t Change

The gambler’s fallacy is the mistaken belief that past events can influence future outcomes in random games of chance. Players who fall for this tend to think that a win is "due" after a streak of losses or that a particular result becomes more likely simply because its opposite has occurred frequently.

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For instance, if a roulette wheel lands on red several times in a row, someone might believe black is more likely to appear next, despite each spin being independent.

Wouldn't it be great if predicting casino outcomes were this simple? Is it genuinely possible to anticipate when you’ll win or lose?

What Exactly Is the Gambler’s Fallacy?

The gambler’s fallacy, sometimes referred to as the "Monte Carlo fallacy," is the mistaken belief that if a particular outcome hasn’t occurred for a while, it becomes more likely to happen. For example, if you flip a coin five times and it lands on heads each time, a person influenced by this fallacy might expect the next flip to land on tails, believing the result is "overdue."

However, the reality is that the odds of landing on heads or tails remain the same with every flip. Each event is independent, meaning past results don’t influence future outcomes. This concept applies equally to random games of chance found in casinos.

Many gamblers fall into this trap, assuming they can predict the next outcome based on what has already happened. However, games governed by Random Number Generators (RNGs), such as roulette, slots, and dice, are entirely random. This means past outcomes have no bearing on what happens next.

Historical Cases of the Gambler’s Fallacy

Over the years, there have been numerous instances where individuals have relied on the gambler’s fallacy in hopes of making a profit, often with less-than-ideal outcomes. Here are two notable cases that highlight the dangers of this misconception:

The Monte Carlo Casino Incident

One of the most famous examples of the gambler’s fallacy occurred in 1913 at the Monte Carlo Casino, where the roulette ball landed on black 26 consecutive times. Believing that red was "due," players began placing increasingly large bets on red, convinced a change was inevitable.

Despite their expectations, the ball continued to land on black, resulting in huge financial losses for those betting on red. This incident remains a classic illustration of how the gambler’s fallacy can mislead even experienced players into irrational betting decisions.

The Unsuccessful Craps and Blackjack Sessions in Vegas

In the 1990s, several notable losing streaks were reported at various blackjack and craps tables in Las Vegas, where gamblers fell prey to the gambler’s fallacy.

Convinced that certain outcomes were "due," players began placing increasingly larger bets, expecting the next hand or roll to break their losing streak. However, instead of turning their luck around, these mistaken assumptions led to significant losses, ultimately increasing the casinos' earnings.

Gambler’s Fallacy in Stock Trading

The gambler’s fallacy isn’t limited to casino games; it also plays a role in stock trading. Many investors wrongly believe that after a stock’s price has consistently dropped, it is bound to rise soon. This assumption is similar to how gamblers expect outcomes to balance out over time. In reality, stock market movements are unpredictable, just like casino games.

Cognitive Biases Behind the Fallacy

When it comes to gambling, most gamblers often think of strategies that can help them win big. Some strategies have sound logic behind them; however, any strategy that believes certain outcomes are more likely to occur when the maths tells us the odds remain the same are very flawed.

Human Perception of Randomness

Humans have a natural tendency to find patterns, even when none exist. Our brains struggle to accept true randomness. When people see a streak, they expect the opposite outcome to balance things out. This is one of the key reasons the gambler’s fallacy exists. Individuals are sure that random events must “even out” over time.

Influence on Decision-Making

The gambler’s fallacy clouds judgment. Many players increase their bets after a losing streak. That’s because they assume that a win is on its way. This belief leads to risky decisions and more significant financial losses.

Players also experience a false sense of control. They think they can predict what will happen next. However, random events operate independently. This means that each result is separate from those before it.

Statistical Analysis of the Gambler’s Fallacy

While cognitive biases drive this behaviour, exploring the statistical side of the fallacy is crucial to understanding why it persists. The upcoming sections will examine the statistical framework that fuels this belief.

Probability Distribution

If you’re aware of probability, you won’t fall for the gambler’s fallacy. The odds of landing heads or tails in a coin toss are always 50%. Even if heads show up ten times in a row, the next flip has the exact same odds.

Gamblers often mistakenly believe the odds must shift after a long streak of the same outcome. However, the probability distribution for random events remains constant. Previous rounds don’t matter, so you shouldn’t rely on them to give you a hint of what will follow next.

Law of Large Numbers

According to the law of large numbers, the results of random events will average out over numerous trials. Nevertheless, this, in any way, doesn’t mean that things balance out quickly.

Let’s provide another example with a coin. If you flip it 1,000 times, the overall result will likely be close to 50% heads and 50% tails. However, long streaks of heads or tails can still happen within small sequences.

Gamblers often misunderstand this concept. They expect short-term outcomes to balance quickly, which reinforces the gambler’s fallacy. This particular mistake may lead to losing gaming sessions at slot machines or roulette wheels.

Real-Life Examples of the Gambler’s Fallacy

The gambler’s fallacy often manifests in different forms of gambling, from casino games to sports betting. Below, we explore how this misconception plays out during actual gambling sessions.

Casino Games

The gambler’s fallacy shows up a lot in casino games like roulette, craps, and slot machines. In instances where red shows up several times in roulette, players assume the ball will fall into a black sector. But the odds of hitting any number or colour on a roulette wheel are the same with each spin, no matter what came before.

Some gamblers even develop “strategies” based on this fallacy. Many increase their bets after losing or winning streaks. However, in games of pure chance, past outcomes offer no hints about the future. For this reason, it’s always important to play with stakes suitable for your current budget.

Common Misconceptions Based on Gambler’s Fallacy

Numerous gamblers like to use specific betting systems, hoping this will help them win more. While such strategies work for specific games, they don’t apply to ones that are entirely random. The following sections focus on the misinterpretation of patterns and the illusion of control that often become reasons for players to lose more.

Misinterpretation of Patterns

A major misconception regarding the gambler’s fallacy is seeing patterns where none exist. New and experienced gamblers often think that a jackpot is more likely to occur if a slot machine hasn’t paid out for a while. This false belief pushes gamblers to increase their bets or continue playing the same slot for hours.

In reality, slot machines operate with random number generators (RNGs). This indicates that every spin is independent. Your previous outcomes or the size of your stake carry no weight. The same thing applies to roulette and other games of chance.

The Illusion of Control

Another misunderstanding is the illusion of control, where gamblers believe they can influence outcomes. Some players think using a special technique or strategy will increase their chances of winning. This overconfidence can lead to riskier bets.

While skill matters in games like poker, luck-based games like roulette, slots, and lotteries are random. No strategy can change the outcome of these games. Even if you use a strict betting system, it won’t affect the future results of the game.

Key Points to Remember

The Gambler’s Fallacy can have a negative impact on many players’ gaming sessions. To avoid finding yourself in such unpleasant situations, we advise you to take a look at our list of valuable tips.

  • Don’t increase your stakes in luck-based games only because the previous outcomes were unsuccessful
  • Remember that each outcome is independent in RNG games
  • You can’t predict whether or not random outcomes will even out

Gambler’s Fallacy FAQ

What is an example of the Gambler’s Fallacy?

A typical example is believing that after flipping heads five times in a row, tails is more likely to appear on the next flip. The chances of getting heads or tails are always 50/50. The previous outcomes don’t matter. Also, when you play online slots, your previous spins won’t affect the future ones.

What is a famous case of the Gambler’s Fallacy?

The most famous case is the 1913 Monte Carlo Casino incident. After the ball landed on black 26 times in a row during roulette, players lost millions betting on red. They believed red was “due.” However, the roulette wheel has no memory, and each spin is independent.

Is the Gambler’s Fallacy a cognitive bias?

Yes, the gambler’s fallacy is a cognitive bias. It comes from the human tendency to find patterns in random events and the wrong belief that past results affect future ones. This bias often leads to bad decisions and hither risks in gambling.