The Psychology of Gambling – Traps and Fallacies to Avoid

The Gambler’s Fallacy

Every conversation about the psychology of gambling will start with a fallacy that is so common that it was named the Gambler’s Fallacy.

Simply put, this is a belief that an outcome has to happen soon because it hasn’t happened in a while.

There is no way around it – this belief is not valid. Not one bit. Casinos wouldn’t be in business for very long if they offered predictable games with outcomes that are due.

Whatever random game you look at, be it driven by a random number generator (RNG), actual dice, real roulette ball and wheel, or wheel of fortune, the same thing is always true. Each new outcome is independent of all that came before it and of those that come after it. The game has no memory of past events.

While a probability theory called the “Law of Large Numbers” says the results obtained from many trials should be closer to the expected value the more performed, it is a fallacy to base any assumption on this. How most people think about this phenomenon has a different name – the Law of Averages – which is no law. It is wishful thinking that desires a balancing event.

Also, basing our understanding of the game on only a few outcomes we observe is a trap. Even if we know a lot of Reds have been coming up on the roulette wheel recently, it would be wrong to assume it has to ‘even out’ with Black more likely to land from now on.

How do we know that Blacks haven’t been far more common on this wheel since it was spun for the first time on that table years ago, and Reds are ‘due’?

I’ll repeat that no outcome can be ‘due’. But even if it could, we couldn’t know which one is, in fact, due.

Long story short, there is not a single proven thing that would tell us when some outcome would be due. Any attempts to find an outcome that is due will fail. Gambling on random events is just that – random events – and no sense can be made from it.

Example: Even if you see a large win multiplier applied to the number 22 in Xxxtreme Lightning Roulette twice in a row, it neither increases nor reduces the chance of another multiplier landing on number 22 on the next spin.

Illusion of Control

Gambling games promote an illusion of control, which is a wrong belief that you have any effect on the outcome whatsoever or that it is a matter of skill, whereas it is, in fact, a game of chance.

Some gamblers think they are skilled at some gambling game, making educated guesses and are, therefore, more likely to win than a person who is simply placing bets wildly on random outcomes.

Both are equally likely to win as they place bets on a game of chance.

Example: You’re playing live baccarat, and you’re an intelligent gambler who knows the Banker wins more often than the Player. You see three Player wins in a row, so you do what makes sense and place a bet on the Banker win. Another person at the table puts a Player win, which you scoff at, and that person ends up winning 1:1. Your educated guess didn’t matter – the chance of a Banker win was just a tad more likely, and you had no control over the outcome of the deal.

Availability Heuristic

This cognitive bias often goes hand in hand with Gambler’s Fallacy. You are probably giving more importance to the results immediately available or the most recent ones, not considering other past results.

Example: You notice three Red results in a row while playing Live French Roulette. You’d probably think a Black is due, especially if Reds keep coming up. But if you’d look at the last 100 spins, you’d see 42 Reds and 58 Blacks, which would likely change your mind. Not that any of this will matter since the roulette wheel has no memory, but it is an example that explains how you place more importance on recent events. You might even think the recent outcomes have more weight than the older ones.

Gambler’s Conceit

Yet another fallacy with gambling in its name is one where you believe you will be able to stop risky behaviour while still engaging in it.

In other words, you believe you can exert the self-control necessary to quit the game while you’re ahead.

Quitting while ahead is very good and the only known way to win on gambling.

But it is unlikely, as a gambler who wins has little to no incentive to quit the game and is instead encouraged to continue gambling. Some things that usually come to mind are ‘I’m gambling with the casino’s money now’, which makes you continue gambling, whereas the reasonable decision would be to quit and take the winnings.

Also, if you happen to be losing, the most obvious thing to do is to continue gambling to win back the money you’ve lost.

It is obvious by now that you are incentivized to continue gambling in both cases, if you’re winning and if you’re losing.

If you’re winning, it’s a free ride anyway, you’re riding the hot hand and playing with the casino’s money.

If you’re losing, you need to keep playing because you must win the money back; you’re due a win.

Both of these are wrong.

A person who can exert enough self-control to quit while ahead is likely to be a serial winner at the casino.

A person who can walk away after losing a certain amount is far less likely to go bankrupt than someone who cannot accept they’ve lost money and tries to win it back at all costs.

Example: A good way to avoid the Gambler’s Conceit altogether would be to set win/loss limits. If either of these limits is reached, you quit and don’t gamble anymore that day. For example, if you win a net amount of £100 on Monopoly Big Baller, you take the 100 and walk away. Likewise, if you lose £100, you call it quits as you’ve lost enough and don’t want to lose any more.

Gambler’s Ruin

A gambler playing a game with a negative expected value – all casino games – will eventually go broke regardless of the betting system they use.

If you stay in the game long enough, you will meet your ultimate demise as a gambler: the loss of all funds you invested in the game.

This again emphasizes the importance of being able to quit while you’re ahead. If you can do so, that would be your best weapon against Gambler’s Ruin.

It’s interesting to note that even if the game was entirely fair, with no house edge, and your resources are finite while the houses are infinite – which is the case – you’d still eventually go broke. The house can keep up indefinitely, and you won’t be able to at some point.

Example: Crazy Time is a popular live game show that can keep you playing for hours but has a certain house edge. You will probably lose money if you play it indefinitely without bankroll management or goals. If you set a budget of, say, £200, and you quit if you lose that amount or quit as soon as you win £100, you’ve given yourself a fighting chance.

Hot Hand Fallacy

While in sports betting, this might even be credible, where a successful team is more likely to win the next game than a team with a poor run of results, in casino gambling, it is a fallacy that will result in losses.

The idea that you’re on a roll is most commonly associated with the game of craps.

Of course, since every dice roll is independent of all rolls before it, it is simply impossible to be on any roll or have a hot hand. You will win or lose based on luck alone, and the luck will apply to one dice roll at a time.

Example: You’re playing live craps and roll seven twice, which means you’ve won twice. You might think you’re on some roll and lucky with the dice, but in reality, all outcomes of your next dice roll are equally likely.

How to avoid fallacies in gambling?

Finally, some tips will serve as a general safeguard against traps, fallacies and biases in gambling. If you follow these, you’ll be safe.

The general idea is to accept the fact that outcomes are random. Also, assume that your profit/loss will go up and down periodically, and understand that quitting at the right moment is the one thing that will affect your gambling the most.

Have the self-control to quit while you’re ahead. Knowing when to stop, and being able to do so, is your most important weapon against the casino. Set a win limit, and when you reach it, no matter what, walk away.

Have the self-control not to chase losses. Many people who have lost their homes and families could have prevented it if they could only come to terms with the £1k loss. But they didn’t. They kept going and lost so much more. Set a loss limit for yourself, and when you reach it, no matter what, accept the loss and walk away.

Know the mathematics of the game you’re playing. Your expectations won’t be unrealistic if you know how likely you are to win or lose at a particular game and what the house edge is. Whatever game you’re playing, look it up on LiveCasinoComparer.com and educate yourself about the appropriate strategy.

Please focus on the nature of the game and its risk/reward ratio. For example, if you’re betting on roulette Red and Black, you will always only win 1 unit. The same goes for Blackjack. Usually, it’s better to place wagers that can get you a mega win if you’re lucky than to take the pedestrian route and win 1 unit.

Don’t look at recent results. They mean absolutely nothing. What you can find out in the current results, however, is that the game’s mathematical probability can produce long streaks one way or another. So, recent results can only show you how wildly unpredictable a game is. If you think it has to even out, It doesn’t.

Forget about any hot-hand fallacies. It’s impossible to enter a winning streak that means something or a losing streak – it’s just a consequence of random events. Gambling is random. Utterly random. You’re not magically unlucky if you’ve lost five times. It just so happened that five independent events didn’t end up the way you wanted them to.

Don’t expect anything. Finally, the best possible advice is don’t expect a win. You don’t have any control over the outcome, and no outcome is ever due, so make sure you’re never expecting to win. Your job as a gambler is to participate in the game by placing a wager, hoping- but not expecting – a win. You can’t win if you don’t place a wager, and that’s as far as your control over gambling goes. You control when and how you place bets, and that’s it. The game takes care of its outcomes. You don’t.