As promised, here is the flip side to my post on Investor’s Logic. Here we discuss, Gambler’s Logic.

If I toss a coin and heads turns up five times in a row.
Which side is more likely to turn up the next time?

Heads? Five heads in a row is a pattern - the trend is likely to continue.

Tails? Six heads in a row is unusual so tails is more likely.

The above answers are examples of gambler’s logic – the perception of patterns in random data.

So which is the correct answer?
Neither - every coin toss has an even chance of turning up heads or tails. It never varies.

There is not much more to say on this topic, as gambling is gambling. I believe if you are randomly picking stocks out of a newspaper to trade on, it is the same as randomly picking a horse out of a newspaper and putting your money on it, it’s gambling.

So which one are you…?

That’s all for now,

Happy trading and remember…

Mums the word

Marketmum
Stock Market Investor
Planet Wealth Blog © 2007

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