Today I would like to talk about something I just read about…
Cool story that can teach us something, that also applies to binary trading also…
On August 18, 1913, guests at the Monte Carlo casino in Monaco witnessed something highly improbable:
At one point in the day, the roulette wheel landed on a black number a dozen straight times.
Not surprisingly, the guests rushed to place bets on red.
They were betting that the unreal streak of blacks was very likely to end on the next turn, with some doubling or tripling their bets.
Yet the wheel refused to produce a red number.
The streak continued until the ball had landed on black an incredible 26 consecutive times, resulting in tremendous losses for the guests and one of the casino’s most profitable days ever.
The guests suffered (and the casino benefited) from an inherent cognitive bias called fallacy of the maturity of chances, or gambler’s fallacy, which also afflicts traders.
Why do we tend to invest against winning or losing streaks?
Posted on by Rick Silva