Gamblers Fallacy (Monte Carlo Fallacy) is the false belief that past events have an impact on the probability of future outcomes of a truly random event.
Gamblers Fallacy Example
The easiest way to explain this is with an example. If we flip a “fair coin” (a truly balanced coin with 50/50 chance of being heads or tails) ten times and it lands on heads 9 times, someone who believes the gambler’s fallacy will wrongly assume that the next flip is “due” to be tails (tails is overdue as an outcome).
In reality this is wrong. The rules of probability say that every “fair coin” flip has exactly a 50/50 chance of landing on heads or tails no matter what. Period, end of story. This applies very easily to roulette, it doesn’t matter what color came last on a fair roulette table. The probability of hitting red or black doesn’t change depending on passed outcomes either.
MYTH: Despite what some people think, Roulette doesn’t have 50/50 odds, there is 1 green zero in European Roulette and 2 green zeros in American Roulette.
Inverse Gamblers Fallacy
Unsurprisingly inverse Gamblers Fallacy (or reverse Gamblers Fallacy) is the mistaken belief that the coin flipped 9 times on heads will land on heads. This is also not true for the same reasons as above, it is however a better bet. This is because in reality nothing is perfectly designed. If a coin landed on heads 9 times in a row, one might assume the coin favored heads in design (it wasn’t a fair coin, thus one should bet heads to materialize an edge inherent in this unfair coin).
FACT: Future odds are not based on past odds. The probability of something happening more than once, before any event takes place, is not the same as the probability of each event happening. The chances of a coin landing on heads ten times is 1/2^10 or 1 in 1032, if a coin has already landed on heads 9 times the chances of it land on heads again is 1/2^1 or 1 in 2.
The Psychology of Gamblers Fallacy
Without getting too deep into things, we are hardwired to recognize patterns. Your brain wants to tell you that outcomes can be predicted based on past events (fire burns hand, brain says don’t touch fire). However, for the purposes of gambling one should not trust their instincts and always trust a solid strategy based on mathematics if their intention is to actually win.