What is the gambler’s fallacy and how to avoid it?
The Gambler’s fallacy is defined as making mistaken theories on the outcome of random events. It’s common among gamblers who favour games of chance and probability like roulette or craps. This fallacy carries risks because of the potential losses it can do to your bankroll.
Aside from that, it can also lead to a negative mindset that shortens your time gambling or having fun. That’s why many gamblers try to avoid the gambler’s fallacy by staying alert and learning as much as possible about it.
If you want to learn more about the gambler’s fallacy, like what it is and how to avoid it, keep reading this guide by Stake!
What is the gambler’s fallacy in a sports setting?
The gambler's fallacy happens when a person feels that past events affect the result of a situation. However, because random events are independent of one another, there’s no real way to tell how the next result may pay out, making this a dangerous thought.
In sports betting, this could be presented as the belief that because a certain team won the last 3 competitions, there’s no way they would lose the next one.
Here are some common scenarios of having the gambler’s fallacy:
- When you have a streak of wins, and you want to keep going to keep the momentum going
- Desperate situations when you’re low on bankroll, and you want to recoup those losses as soon as you can
- Overconfidence in your bet winning because of a marginally higher probability
The gambler’s fallacy is a type of cognitive bias that falls under the category of a calculation bias. It occurs as a result of how people's thoughts and actions manifest themselves because of a situation. This means that having an unaddressed or undetected cognitive bias could lead to incorrect analytical thinking.
Novice punters commonly succumb to the gambler's fallacy when they get swayed by the odds of winning, successive winnings and the thrill that comes with it. Don’t get us wrong—having initial wins is great, but if you fall for Monte Carlo’s fallacy, it could lead to an immense net loss over time compared to the initial success.
Monte Carlo fallacy origins: How it all began
The gambler’s fallacy, also known as the Monte Carlo Fallacy, was properly coined in the 1910s. It originated from an event at the Monte Carlo Casino in Las Vegas in 1913.
As the story goes, a group of bettors played roulette and won 10 rounds betting on black. They then bet on red, thinking the ball won't land on black again after a 10-time streak. However, the ball kept landing on black until the 26th spin instead.
Looking at it logically, we know that roulette is a game of probability and chance. There’s no logical progression, and you can't predict the spin results since they're always random.
However, due to preconceived notions and cognitive biases, it's easy to think that the wheel can't possibly land on black 29 consecutive times, even though it can and did.
What is the Monte Carlo simulation method?
Now that you know about the Monte Carlo Fallacy and its dangers, it’s time to tackle how you, as a bettor, can minimise it with a logical perspective. One of the ways that people address the fallacy is through the Monte Carlo simulation method, a computational technique that makes it easier to weigh the risks and benefits of uncertain outcomes.
In this section, we’ll look at the steps and tips for calculating the Monte Carlo Simulation method for gambling activities.
Step 1 - Know your variables
Before you start running calculations, you need to clearly understand which variables are needed to build a predictive model. For this, you’ll need to assign a dependent and an independent values. The dependent value is the data you’ll predict, while the independent data is the risk and other factors involved.
For example, you could be predicting the result of a craps round. The result of the craps round serves as your dependent variable, while your independent variable can include your type of wager and bankroll health.
Step 2 - Gather historical data
This step deals with the risk factors, otherwise known as the independent variables. From here, you need to know historical data and how far back you’re willing to base your calculations. The more historical data you can add, the better the prediction will be.
Step 3 - Run the simulation lots of times
Now that all your variables are set, and you have your historical data, it’s time to run the simulation multiple times. This is vital since each run will produce different results due to the probabilities attached to it. It also means it can produce many combinations and possibilities, which you must know.
Accomplishing multiple tests makes a better representative sample of the outcome, given the different combinations available.
This can be seen when bettors play slot games, especially using the fun mode. The fun mode allows bettors to play the game with little risk for multiple sessions. This allows them to make a better assessment by running the game for a long period. Once a good sample size of results has been created, gamblers may then want to start playing while better weighing the risks of a real game.
Step 4 (optional) - Consider new factors that may arise
The Monte Carlo simulation is an effective tool that helps you better assess the probabilities, factors and risks involved in gambling activity, whether it’s sports betting or casino games. To keep things fresh, consider using this calculation on games or matches with special rules, such as roulette games.
Tips on how to avoid gambler’s fallacy
Avoiding the gambler's fallacy means being aware of your cognitive bias when gambling and actively fighting against it. However, this is easier said than done. So to help you steer clear of this dangerous error, let's dive into tips on avoiding gambler's fallacy, so you can analyse situations better and play more responsibly.
Keep your emotions in check
The gambler’s fallacy happens when we don’t properly or objectively judge an event. These situations arise when we’re swayed by emotions, like the drive to win more and ‘keep the momentum going’ or desperation when our bankroll is severely unhealthy. Still, we feel that our situation can change with ‘one more roll’.
A second situation to consider is the mind’s propensity to make mental shortcuts when insufficient information is received. The mind likes to fill in the gaps in a quick way so that we can make split decisions in fast-paced games like roulette. Therefore, it’s no surprise that we could be making leaps in judgement that lead to the wrong conclusions.
A good way to keep your emotions in check is to pause your thinking and take a deep breath. Giving yourself time to breathe helps stimulate relaxation and give yourself space to think through what’s happening in front and in the present. Remember that letting your emotions run loose won’t help you win your wager and will only cause additional stress.
Remember two things to combat a hasty decision: that games of chance in a casino don’t rely on how fast you make a bet, and that information is key.
Online slots, baccarat, and bingo don’t reward you according to how fast you play. Instead, gather as much information as possible about the game, like the mechanics, available bets, payouts, probabilities and Return to Player (RTP rate).
Strategise what you can control
Strategising with what you can control is much better for your gambling career because it helps determine the worth of a wager and game. For example, consider the game’s RTP rate, betting probabilities, payouts, and extra features when choosing which game to play to up your winning chances.
A game’s RTP rate shows how much your wager on the game can return over a long time. By proxy, a higher RTP on a game means you’ll receive more rewards from your game of choice.
Betting probabilities are also important to consider, like in games of roulette, where outside bets have the potential of winning smaller prizes more frequently. In comparison, inside bets give bigger prizes rarely.
You also may have noticed that certain table games will have variations that offer extra bets with their unique mechanics and probabilities. The mechanics not only serve to make the game more fun, but they also allow you to diversify your bets and not put all your eggs in one basket.
Learn about betting strategies
The Martingale method is one of the most well-known betting strategies across the casino industry and is best used by people with a healthy bankroll and appetite for risk-taking. The main benefit is that it helps reduce losses and maintain your bankroll while increasing your chances of winning by altering your bets according to the outcome.
To use this strategy successfully, you must first make bets on a round. Should your wager be unsuccessful, your next wager needs to be double the previous amount. Following this technique, it allows you to double your rewards if you win the following round and reduce your losses if you lose it.
For example, let’s say your initial bet on a match was worth $100, resulting in a loss. Your next bet should be worth $200, and if it wins, you recoup your loss from the initial round.
The d’Alembert strategy
The d’Alembert Strategy is another popular strategy because of its similarity to the Martingale strategy. This method works well for gamblers because you can start from a small wager, and this can snowball into larger figures depending on how the situation goes.
For the d’Alembert Strategy to work, you need to double your wager in increments after each win. By doing so, you steadily build on successful wagers. In instances when you experience a loss when using this strategy, you need to reduce your stake by one unit and keep this going until you win again.
This method reduces your losses and makes it difficult to fall prey to the Monte Carlo Fallacy, as long as you keep tabs on the wager amount.
The Fibonacci strategy
The baccarat Fibonacci method is a great betting strategy that thrives in situations when the player's goal is to reduce the loss on losing situations while maximising winning bets. It should be emphasised that, like other progressive betting systems, it is meant to be used on even-money bets that have as near a 50/50 chance of winning.
Therefore, it's worth considering the decision to use this tactic in roulette when betting on black or red, odd or even, and 1-18 or 19-36. To use the strategy, the player begins betting from the leftmost sequence, as seen below and progresses one step to the right for each bet lost, while winning moves the player back two steps:
1-1-2-3-5-8-13-21-34-55-89-144-233 and so on.
How the betting strategies can help you
Each strategy works best for gamblers with different play styles and bankroll health. Before you try each, it’s best to know how each can help you. Here are some of the benefits of using them:
- If you’re sticking to a betting strategy, your thought process will have to follow it thoroughly and avoid taking mental shortcuts
- Different betting strategies suit various bettors with different play styles and varying bankroll health.
- Because betting strategies help determine your wager amount throughout the game, it’s much harder to let your emotions dictate it. This can then help you keep track of your bankroll and spending.
Win big by overcoming the gambler’s fallacy in Stake!
Understanding the gambler’s fallacy and working to combat it can be the difference between a long and prosperous casino career and a short stint. This is why many aspire to balance enjoying an intense and thrilling casino experience while also building the discipline to look at games and their results objectively.
Remember that at the end of the day, you’re dealing with money that may be better spent playing casino table games like online poker or blackjack that can net you better results through strategic thinking.
There are also ‘fun-mode’ options on luck-based games that can help curb your gambler’s fallacy because no stakes are made while you get to enjoy the experience of betting big and winning big.
Frequently Asked Questions
Why do we experience the gambler's fallacy?
It’s safe to say that many bettors have experienced gambler’s fallacy at least a few times in their gambling careers. These bettors experience gambler’s fallacy mainly due to being swayed by negative or positive emotions.
What are the benefits of using Monte Carlo simulation in sports betting?
The Monte Carlo simulation is a fantastic way to calculate the chances of your success amidst uncertainty and probabilities. Sports betting is interesting because it has a lot to do with people and their ability to win sports matches.
Calculating factors like a sport’s team’s track record or an athlete's abilities over time helps you build a better picture of the odds of success. Knowing this also helps you determine if you want to push through with your wager and how much you ought to bet.
Can Monte Carlo simulation guarantee accurate predictions in sports betting?
No, it cannot guarantee a 100% accurate prediction, only a better and well-studied prediction.
This is because of the random nature of many luck-based games. As a result, there’s no such thing as 100% certainty because of the random and spontaneous nature of these betting activities.
What is the Monte Carlo simulation?
The monte carlo simulation is a computational method for weighing risks on uncertain events. It’s highly useful for luck-based games, link bingos, lotteries, slot games, and craps.
How do I detect a gambler's fallacy?
Detecting and avoiding the gambler’s fallacy is difficult at first but gets easier over time. To detect it, you first need to check if you have it and understand the circumstances of when it happens.
Things like documenting wagers made in scratch card games or teams involved in a match can help you determine if you have it and how bad you may have the gambler’s fallacy.
When does a gambler’s fallacy occur?
Gambler’s fallacy can occur anytime in a gambling session and even outside the casino’s walls. If you’re a person who finds themselves quite swayed and driven by their emotions, you might find that the gambler’s fallacy may be more present in your life than you first thought.
What betting strategies should I know to combat the gambler’s fallacy?
Ultimately, it’s up to you and your mindset to combat and stay vigilant against the gambler’s fallacy. However, having a betting strategy like the Martingale system or Fibonacci strategy can help remind you and make you more conscious of the wager at stake.
Why should I avoid making the gambler’s fallacy?
Every gambler wants to win big and experience the rush of having consecutive wins. However, there are times when we might get driven by our emotions to make irrational bets, and this could cost you all of your earnings and cut your gambling time short.
Avoiding the gambler’s fallacy can help you prolong your gambling session and help build discipline when it comes to gambling activities where luck is a major factor.
Are the Gambler’s fallacy and the Monte Carlo fallacy the same?
Yes, the gambler’s fallacy and the Monte Carlo fallacy mean the same thing. They just have different names. Often, you’ll see these terms interchanged because of their casino roots.