Gambler’s Fallacy

Suppose an NBA handicapping method has proven over time to produce 55 percent winners on average per season. If the selections are only posting 50 percent winners halfway through a current season, does this confident handicapping method begin to raise the wager amounts with the belief that 55 percent winners will be achieved at season end? And, future plays would need to win at greater than 55 percent of the time over the remainder of the season to raise the success rate from 50 to 55 percent.

The answer is an unequivocal “NO”. Many emotional cappers and bettors hold to the mistaken belief that the chances of winning increase during losing periods. Sports gamblers on a losing streak suffering from gambler’s fallacy will believe that their next wager will have an increased chance of winning. The reason is that these gamblers believe that they will win in the end; therefore they are more inclined to win the next bet when in the midst of a losing period.

Often times this disastrous thought process leads to larger wagers because sports gamblers feel they are “due” to win. Unfortunately, anyone who believes they are due to win is many times only increasing the probability of losing. Progressive betting schemes are the result of gambler’s fallacy and have caused the ruin of many a gambler.

Gambler’s fallacy fails to realize that the handicapping method is an inanimate entity with no memory. Each pointspread selection is unbiased and unprejudiced and independent of the last. Regardless of the outcome of prior wagers, each and every future bet will have the same 55 percent chance of winning, provided the handicapping method is truly capable of producing 55 percent winners over time.

Gambler’s fallacy is not to be confused with a statistical term called “regression to the mean.” Regression to the mean simply means that if an event has a certain statistical chance of occurring, the event should eventually approach the expected occurrence rate over the long term.

Looking at the graph below, it is seen for this hypothetical series of pointspread plays that during the first 100 or so plays, the winning percentage hovers between 48 and 60 percent. Only after about 225 plays does the winning percentage settle in to the 55% target area.

In plain terms, if an NBA handicapping method can produce 55% winners over time, then regardless of how many winning and losing streaks are encountered along the way, 55% winners should ultimately be achieved at some future point in time. Consequently, a winning handicapping method should eventually post an overall winning record. However, notice the operable terms are “ultimately” and “eventually”.

The inability to understand the difference between gambler’s fallacy and regression to the mean is one of the main reasons why many sports bettors bust their bankrolls long before they would have had any chance of turning a profit for the season. As soon as the wager amounts start to progressively increase during losing periods, gamblers place themselves in imminent danger of going bust. Trust me, the next bet has no compassion for the previous losing ones.

There are two major obstacles with a progressive betting scheme anyway. The first is that Fort Knox is needed to fund the venture since a losing streak will cause the wager amounts to increase dramatically since the objective is to win all the losses back plus show a profit when a winning bet does eventually occur. What happens if the bettor loses ten consecutive bets? Imagine the size of the next wager to recoup the losses.

When you think about it, our federal government could certainly embark on a progressive betting scheme in Vegas aimed at eliminating the federal deficit over time. The U.S. government has access to unlimited funds as it could simply print more money as needed. Such a bank vault could theoretically cover any number of consecutive losing streaks.

Unfortunately, the second obstacle poses a problem for Uncle Sam. Once the wager sizes become too large, the sportsbooks can simply refuse to take the bet. House limits provide the casinos with the ability to cut-off a bet size deemed excessive. Therefore, sportsbooks have built-in protection from colossal money sources involved in progressive stakes.

Sports gambling for any NBA contest is an indisputable, uncertain venture because nobody, and I mean nobody, can predict with any degree of certainty how long of a time period is required to realize the regression to the mean result. Going back to the above graph, who is to say when the 55% winning rate is achieved? It may take 300 to 400 pointspread plays to come true.

This is why Matchup Handicapping holds to the conviction that each bet should be the same wager amount during a betting season. Mission impossible is trying to predict winning and losing periods. It is fact that winning seasons experience losing streaks. It is hard enough picking 55% winners over time. It is impossible to pick 55% winners over every week or every month.

In summary, operating in a gambler’s fallacy mode attempts to predict when the regression to the mean outcome will come true. Unfortunately, the short term gambler’s fallacy will run its course long before the realization of the long term regression to the mean. As I have written many times before, the single biggest mistake made in sports betting is viewing it as a short term prospect.

On the contrary, a successful winning strategy involves a long term and disciplined commitment. You are not running a sprint. You are running a marathon.

NBA Playoffs - Avoid Forcing the Action

The exciting part of the NBA playoffs is that each series is an elimination round. Every playoff game takes on meaning, since every loss finds a team one step closer to extinction. Having watched countless NBA playoff games, the level of play is highly energized as the teams are faced with the ultimate motivation of the do or die consequence.

Needless to say, NBA playoff fever spreads throughout the sports betting world. Since every game is large, I believe I am accurate in stating that there is a noticeable increase in the betting action during the playoff season. While this time is certainly exciting for any pro hoop fan, a large trap with far reaching tentacles is lurking around each and every contest. Cappers and bettors must fight off the temptation of having to play every “big” game. The need to show up for every big game is a sure-fire formula for losing precious amounts of the bankroll.

My NBA playoff handicapping philosophy is very simple: proceed with caution and pick the spots wisely. Think quality, not quantity. The game plan is to build the regular season ending bankroll, not to give it away. All gamblers should realize that many of the best bets are the ones that are never laid.

The Hook Slide

All NBA games have an opening line. It is sometimes released the night before, known as the overnight line. This is the linesmaker’s best estimate to entice equal action on both sides. As accurate as the linesmaker is at setting the initial line, there is obviously no guarantee that equal action will follow for every game. To overcome this uncertainty, sportsbooks have the capacity to adjust the line, usually in half-point increments, right up to game time to keep the action balanced to the greatest extent possible.

The biggest line adjustment usually occurs right after the opening line is released. It is said that many professional gamblers will see great value in some early lines and they want to get their money placed before the line moves against them. Sportsbooks often use this first round of activity to fine-tune the pointspreads. After this adjustment period, the lines in most NBA games stabilize to a large degree. This frequently happens before many cappers and bettors even begin to look at the games on the betting card.

Yes, you will see half-point differentials in Vegas and offshore books throughout the day. There are times you may even see a full point differential, but this is usually over a very short time occurrence. When shopping for the best line, the key for bettors is to guess when the line is affording them the maximum value. For example, a bettor wants to back the Cavs and the accessible lines have the Cavs at -8 or -8.5. If the bettor feels that -8 is going to be the best line available throughout the day, the bettor places the bet at -8. This is not to say that the line couldn’t move to -7.5 at some point later.

There is a general rule that says if you are going to play favorites, get the action down early. Conversely, if you are going to play dogs, get the action down late. Consider the logic in this process. If early money goes on the favorites, then the books will obviously increase the points for the dogs to get the equal action. However, like everything else in life there are no guarantees that this will hold true for any given game. In fact, many games will do the direct opposite. Hence, the term is gambling.

On numerous occasions, I have heard and read comments from professional handicappers who claim that “while shopping for the best line is prudent, a half point difference (referred to as a hook) here and there over the long haul should balance out, therefore it should not have a significant impact on winning and losing.” Moreover, many pro cappers have often stated that if a half point is going to make the difference between winning and losing, one should not be in the sports betting business.

On the surface, I totally agree with this viewpoint. Due to the total randomness of how a sports contest could play out, there are certainly heavy doses of good and bad luck associated with sports betting. We all have experienced the agonizing half point defeats and the exhilarating half point victories ATS. They are inevitable. We can only hope that the half point margins balance out over time.

Unfortunately, there are many professional cappers who take an unfair advantage of an unsuspecting public with their half point tactics. This sleight of hand is accomplished when pro cappers release their plays by just giving the side or the over or under. By not listing a specific pointspread or total associated with the games, this allows them the opportunity to grab a half point should they need it to convert a loss to a push or a push to a win. In other words, they are not going to lose a game by a half point. If the bettor lost the game by a half point, the capper maintains that it is the bettor’s fault for not getting the best line.

Another approach is for a capper to simply post the best line or total that occurred during the day which reflects the best value for them, even though that number may have been the opening line and is no longer available at the time of the release. What good is this line if the bettors can't get it? Sometimes this practice can give cappers a full point advantage at their disposal. Such tactics are trickery. I refer to this unscrupulous practice as the “hook slide.”

So how much of an advantage is the hook slide? Over the past few NBA seasons, about 8% of all the games fall within a point of the posted line. Therefore, for every 100 NBA games released by a handicapper, there will be approximately 8 games available for the hook slide.

Now, let’s assume my 85 year old mother, who is still quite sharp of mind I may add, wants to become a professional NBA handicapper (hypothetically of course). Although she really doesn’t know anything about any of the NBA teams, she knows the pointspread theoretically makes every game appear equal. Therefore, she picks the games by flipping a coin – heads selects a play for the home team and tails for the road team. She figures the odds are 50-50 for every game and if she picks 205 NBA games her ATS record will be about 100 wins and 100 losses with 5 pushes.

Obviously, 50% winners are a losing proposition in the sports betting world due to the vigorish. If 10% juice is used for my mom’s plays, she winds up with -10 units. Since I advocate a betting strategy that starts with a bankroll of 20 units, my mom’s performance would effectively reduce the starting bankroll by 50% by season end. Needless to say, my mom is not too happy with the prospect of finishing this much in the red and therefore decides to exit the business.

Let’s say there is another handicapper who made the same exact 205 plays as my mom. But, the difference is that this capper readily employs the hook slide tactic. Therefore, the 5 push games become wins with the half point slide and another 5 losses result in pushes with the half point slide. Doing the math for the affected ten games, the hook slide converts the modified ATS record to 105 wins and 95 losses with 5 pushes. The bottom line is now +0.5 units which is a huge improvement over -10 units.

The hook slide allows a convenient way for cappers to dupe the betting public about their ATS record. You can readily see that handicappers only need about 50% winners ATS when picking 200 to 300 NBA games to have a winning season when using the hook slide. This is an all too common handicapping scam and there appears no way to prevent its continued use.

Parlays

A parlay is a combination bet where all the bets fall under a single wager. Each bet must cover to win the wager. For example, a three team parlay involves three bets and if all three cover, the bettor collects six times the wager amount. Sounds good except for the fact it only takes one bet to lose and the total wager amount is lost. Important to note is that depending on the book, a push in a parlay results either in a no bet situation, or the bet is pushed down to fewer games. Under the push down rule, a push in a three team parlay converts the bet into a two team parlay and a push in a two team parlay would become a straight bet.

The inevitable question arises to whether a parlay bet is a sound investment strategy. In order to answer this question, the important number to consider is the projected success rate for picking pointspread winners. If a bettor is picking less than 52.38% winners, straight bets are better than parlays as the straight bets will lose at a slower rate than the parlays. The consolation for making straight bets would be the bankroll won’t be wiped out as fast. The bottom line is that both straight bets and parlays will be losing propositions for failure to pick consistent winners. If you cannot pick consistent winners, why are you betting anyway?

For the situation where the bettor can pick consistent winners, let’s use some statistical mathematics to crunch the probability numbers. Let’s use a two team parlay where we will back Team A and Team B. The first step is to determine all the possible outcomes for each of the two bets.

There is one combination of two wins. (Team A and Team B cover).
There are two combinations of one win and one loss. (Team A covers and Team B losses). (Team B covers and Team A losses).
There is one combination of two losses. (Team A and Team B both lose).

Thus, there are a total of four win-loss combinations, assuming there are no pushes. If a bettor picks 54% winners over a season, the individual game bet success rate is 0.54 and the individual game bet failure rate is 0.46. Applying the success and failure rates to the four possible combinations shows the following:

The probability of two winners is: 0.54 x 0.54 x 1 combination = 0.291 (29.1%)
The probability of one winner and one loser is: 0.54 x 0.46 x 2 combinations = 0.497 (49.7%)
The probability of two losers is: 0.46 x 0.46 x 1 combination = 0.212 (21.2%)

Since a winning two team parlay pays 13/5 odds, this means a successful parlay will pay out 2.6 times the wager amount. The 13/5 odds also show that 5 out of 18 (27.8%) two team parlays are required to win to break even. For a $110 parlay wager, a winning parlay will pay out $286 and if any game loses, the $110 wager will be lost. If 54% ATS winners over time are anticipated, the expected rate of return on the two team parlay bet is computed as follows:

0.291 x $286 = $83.23 (bettor has a 29.1% chance of winning $286 on successful parlay)
0.497 x -$110 = -$54.67 (bettor has a 49.7% chance of splitting the games and losing $110)
0.212 x -$110 = -$23.32 (bettor has a 21.2% chance of losing both games and losing $110)

Summing the three returns (83.23-54.67-23.32) yields an expected profit of $5.24 per parlay bet. If a bettor played 150 two team parlays at $110 each (gross risk = $16,500), the expected profit would be $786.00.

Would the bettor make more money playing straight bets? If the bettor chose straight bets for the same games, there would be 300 single wagers at $55 each (gross risk = $16,500) and 54% winners would show 162 winning bets and 138 losing bets. With a 10% juice, the profit would compute to (24 – 13.8) x $55 = $561.00. This calculation shows that at 54% winners, a two team parlay has a higher expected rate of return than straight bets.

Actually, 52.7% ATS winners are the breakeven point for two team parlay bets as compared to 52.38% ATS winners for straight bets at 10% juice. In other words, if a bettor can win more than 52.7% of the plays, the two team parlay has a higher expected rate of return than straight bets. And, three team parlays are even better.

Beware, before everyone forsakes straight bets to play all parlays, extreme words of caution need to be expressed. First of all, there is no guarantee that 54% winners will directly translate into winning 29.1% of the two team parlay bets as shown above. It is mathematically possible to only win 16 parlays out of 100 while still picking 54% winners. This worst case scenario translates into $4,664 in losses with a $110 per parlay wager. Ouch! It clearly shows that 29 parlay winners are in no way guaranteed while picking 54% winners in the individual games. Parlays are a high risk venture.

The second reason for not falling in love with parlays is that it can compel bettors to force the action. If only one game stands out on the day’s card, the bettor is likely to force another selection to generate the parlay. This is never a good idea and can quickly accelerate a losing agenda.

Parlays should be an occasional wager and only when the bettor is operating in the profit mode and has two solid plays for that day. If each straight play is worth 5% of the starting bankroll, I advise a two team parlay bet should be 2.5% at most of the starting bankroll amount, and only on occasion.

Sportsform Basketball

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I had the honor of being a contributing writer for the Sportsform Basketball publication in 2009. Sportsform offers angles, advice, team ratings, details and predictions on all the week's college and pro basketball games. It is a valuable asset to my handicapping efforts.