In Tharp's "Trade Your Way to Financial Freedom", he talked about Gambler's fallacy. Using an example of a game played by 40 Ph.D.s,(each of whom were given $1,000 to play 100 trials and their winning chance is 60 percent), he got the conclusion that only 2 of them made money finally because of wrong position sizing. He said that suppose the first three bets are losers and you bet $100 each time. You would think :"Well, I've got three losses in a row and it's time for a win." So you bet more for the fourth time, which he said you've fallen into gambler's fallacy because the fourth trade still has the winning probability of only 60 percent. I was just wondering why probablity theory doesn't work here. According to probability theory, since each trade has two results--winning or losing, the prob. of the fourth consecutive loss should be (1-0.6)*(1-0.6)*(1-0.6)*(1-0.6) instead of (1-0.6). And honestly if I were in that game, I would also bet more after three losses in a row. Also, Tharp seems to believe that 10 losses in a row in the market is very natural, which again contradicts to prob. theory. Any thoughts or explainations will be greatly appreciated.