And now to something completely different……so it seems.
Let’s figure the difference between a so-called “fair”, the European and the American Roulette (all calculated numbers rounded)
Fair Roulette (18 red, 18 black)
- chance of hitting red = 50%
- chance of hitting red 10 times in a row = 0,0977%
European Roulette (18 red, 18 black, 0)
- chance of hitting red = 48,65%
- chance of hitting red 10 times in a row = 0,0743%
American Roulette (18 red, 18 black, 0, 00)
- chance of hitting red = 47,37%
- chance of hitting red 10 times in a row = 0,0569%
How “unfair“, that there is no such thing as a fair roulette 🙂
it means for example that compared to the American Roulette, you have a
- ~31% better chance to hit a red number 10 times in a row if you play European Roulette.
- ~72% better chance to hit a red number 10 times in a row if you play fair Roulette.
The chances are quite small but hitting ten or more red numbers in a row happens in casinos around the world again and again.
One who prefers betting black numbers might call that a series of unfortunate events 🙂 but that is a false approach.
Murphy’s Law tells us that if something can happen it will happen. You just don’t know when. The simple truth is, that a casino expects to lose a certain amount of money at a certain outcome and in a certain probability quite often. The casino does not need to know if the next ball hits red, black or zero. All it must do is to keep the ball rolling and it will make money on the slight edge (zero/double zero) which bends the probability in the casinos favour.
As a second parameter, the price for each outcome is fixed at a level which gives the casino a further advantage against the players.
Things to learn
As a trader you can learn two things from roulette
- Don’t play roulette against the casino!
If you can afford it, play for whatever reason – chats, drinks, meeting men or women but at least don’t play roulette to win money. - Look at the casino approach which is all about the amount a casino is willing to lose in a single event at a certain outcome.
Point 1) is obvious. No need to discuss that. It is in fact much more profitable to believe in Santa Claus (the advertising character created by Coca Cola and not to be confused with the fourth-century Christian saint St. Nikolaus, Bishop of the ancient Greek city of Myra) throwing you some gifts through the chimney as to believe in a winning system when playing roulette against a casino. At least you can’t lose money waiting for Santa Claus though it may be a bit boring. As with Roulette – well, you can’t beat the math!
Point 2) is more interesting because trading is kind of a losing game in the meaning that a trader as well as a casino loses a single trade/play
quite often.
The key point is how much a trader is willing to give away in a single losing trade? This amount will most certainly decide if a trader is emotionally and financially able to overcome several losing trades in a row (3, 6, 10, more?) without throwing the towel. Every losing trade can be the start of an unfortunate series and otherwise. You simply don’t know.
Basically, this is a part of the money management and not the only, but probably the most critical point in a trading system.
I will discuss this and other parts of a trading system in follow-up posts.
Stay tuned!