All in a day's work

What is Gambler's Fallacy?

Am i having a traits of a gambler in my investment decisions


Gambler's Fallacy, in Behavioral Finance, is the belief that if deviations from expected behavior are observed in repeated independent trials of some random process then these deviations are likely to be evened out by opposite deviations in the future.

This simply means this:

If a coin is tossed repeatedly and heads comes up more often than tails, a gambler may incorrectly believe that heads is more likely to appear in the future. But as a matter of fact, a coin has two sides and the chance of heads or tails is always 50-50.

An experiment carried out by Amos Tversky and Daniel Kahneman shows that people see (streaks of) random events as being non-random when they are actually much more likely to occur in small samples than expectations.

In relation to investing:

Do you gamble on the bottom more often at the start of a certain drop?
Have you considered the reasons of an entry/exit or are you just hopeful?
Do you see IPO as a sure-win opportunity?

Make sensible decisions based on analysis and not hear say or gut feeling as regret on a loss is always a worse feeling that the joy of a profit, Loss Aversion.