Thursday 16 November 2023

Gambler's Fallacy

I'm not going to mention any names, but one tipster with an excellent track record who I've been following for several years now, recently sent an update with an interesting, and surprising, suggestion:

We're currently a few points down for the season with both official and unofficial picks, so if you've been thinking about upping the stakes at some point, this should prove to be a great time to do that.
I couldn't agree less. Increasing stakes in an effort to recoup prior losses is loss-chasing and something which is often viewed as a defining feature in the transition from recreational to problem gambling.

If your system is profitable at level stakes, there is never any need to chase your losses. The positive expected value (+EV) will, in the long run, result in profits.

Unfortunately the long run can be very long and natural variance means that there will be sequences, often painfully long, when a +EV system will lose, but the problem with increasing stakes and chasing these losses is that we have no idea when the system will turn profitable again. 

Tossing ten heads in a row doesn't mean we should increase our stakes on tails. If anything, it would be the opposite because, if the same coin is being used each time, it may be biased, but in sports betting where the events are all independent, the system has no memory and thus no idea of when it should start reverting to the mean. 

Gambler's fallacy. Past events do not affect future probabilities.

A system may NEVER revert to the mean, because in sports betting an edge can vanish overnight, and increasing stakes would be a serious threat to ones bank. 

Moving on to the Cricket World Cup, and if you followed my 'back most favourites' strategy you'll have banked a couple more winners in the Semi-Finals with India (1.37) and Australia (1.74) prevailing. 

India are around 1.5 to win the Final this weekend and Favourites have won all three previous Finals and have a good record in Knockout games:

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