The gambler’s fallacy is the belief that if something happens more often than normal in a period of time, it will happen less frequently in the future. For example, you walk up to a roulette table and see that a black number has hit the last ten spins. Your first thought might be that a red number is likely coming because it hasn’t happened in a while.
However, that logic is flawed because each spin of a roulette wheel is independent of past spins. Bettors draw similar conclusions about sporting events. Say LeBron and the Cavs have lost four games in a row, just because the team is on a losing streak doesn’t mean they will win their next game.
This common betting mistake can cause big problems for sports bettors. A casual gambler may go on a hot streak. Believing the streak will continue they bet on more games and place larger wagers. Unfortunately, a gamblers chance of winning their next bet is approximately what their historical winning percentage is regardless if they are on a winning or losing streak. This can lead to a gambler’s ruin.
When it comes to probability, a lack of understanding can lead to poor decision making. The best way to avoid the gambler’s fallacy is to understand the difference between independent and dependent events.
For more tips on becoming a better gambler, check out our article on confirmation bias.
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