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Discussion in 'Trading' started by freewilly, Feb 17, 2008.

1. freewilly

I am perplexed. Hope someone here can help me out.

Letâs make some simplification of the game. If you go to a casina playing a game. Your chance to win is 50%, and dealer has 50% to win. House has no advantage. (some games in Las Vegas is designed very close to 50% win rate. House has slightly the edge). You have unlimited money to bet, and the casino allows you to bet unlimited money. These are the rules.

Now here is what I am going to play. I start with a \$1 bet. Whenever I win, I will start over from \$1 bet again. If I lose, I will put 3 times amount of money of my previous bet until I win. That means, if I lost \$1, I will bet \$3 next time. If I win I will keep the \$3 and start over from \$1 again. If I lost, I will place \$9 next time, and so on until I win. By doing so, I will win every sequence and start over from \$1 again. This sounds a fail proof plan, but I know it can not be right.

Can someone point out the problem of this plan. If it is 50% game, at the end, I should only get break even. Whatâs wrong with my above game plan?

Thanks,

Freewilly

3. freewilly

Yes, the casino does have limit that you can bet, but Let's remove that limitation for now. It is irrelevant to my question.

In stock market, there is no limit that you can play, so if you keep doing average down, will you eventually win? Guess not.

5. freewilly

After some thinking, here is my explanation.

The key is the assumption "I have unlimited money" is wrong. Far instance, if I start bet with only \$1, and I have 1 million in my pocket. It seems that I have unlimited money to bet unlimited times so i can collect \$1 every sequence or few \$. However, in one sequence, if I keep losing for 20 times straight, I will lose \$1 million, and that loss is bigger than all the dollar bills I have collected all the way.

6. freewilly

Thanks, Captain.

Just saw your post. That is indeed the answer. My guess was also correct.

Case closed. I will no longer respond to this thread. Thanks everyone.

Freewilly

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