Some of you may find this interesting. It is excerpted from a recent newsletter that stirred up a world of discussion because we referred to "patterns" in events that are not normally considered susceptible to pattern analysis. The excerpt is a fairly complete explanation of the use of the Labouchere method in baccarat.
<snip>
In addition to the areas explained below, there is a lot of confusion about the
statement that "patterns" exist in what are normally considered random-variable events with no cause-and-effect relationships. The classic example is the question, "If you are flipping a (normal) coin and it comes up heads 10 times in a row, what are the odds that it will come up heads in the 11th flip?" The answer, of course, is 50-50, or a 50% probability.
However, that is ONLY for the 11th flip. Because of a phenomena called "regression to the mean" that has written about elsewhere on this site on a number of occasions, it is slightly more likely that in the next sequence, there will be (again, slightly) more tails than heads. The number in the sequence varies; it may be the next 10, or it may be the excess number of heads in the small sample were in fact "regressing to the mean" to even out an excess number of tails in previous flips.
The application of regression to the mean has enabled a number of very sophisticated bettors to turn a number of casinos into "cash cows" using a fairly simple technique that builds on the Labouchere "cancellation" method originally developed for roulette.
The advantage gained by regression to the mean may be slight, but in conjunction with a Labouchere wagering strategy applied to baccarat, chemin-de-fer, punto banco, or Bank Craps, it is sufficient to enable substantial profits to be derived from situations that the casino personnel believe "impossible."
In fact, the belief in the "Gambler's Fallacy" as a sucker theory is so highly-developed that casinos often install colorful "result trackers" on roulette tables, with the outcome of the last 15 or so coups brightly visible to all who care to look. The idea is that the gullible tourist will see that red has won the last half dozen coups, be convinced that black is "due," and wager accordingly.
How It Plays Out In The Real World
The Labouchere wagering strategy attempts to slightly increment wagers after a loss to increase the amount returned on the wins; the variation is slight, in most cases, and many have used it over the years to win modest amounts with grinder play at roulette. Others have modified the method to use at baccarat and Bank Craps, with substantially improved return.
The modification is simple, and can be as effectively used by competent blackjack players as by baccarat or Bank Craps bettors. The Labouchere uses 1-2-3 as a "series" of wagering units. The two outside digits are wagered (4). If the bet wins, the next wager is the remaining digit, (2). If that is won, the series is completed with a net gain of 6 units, and a new series is started. If any wager is lost, the amount wagered is added to the end of the series, and the next wager is again the two outside digits. Wagering continues until the series is "cancelled," with the associated profit of 6 betting units.
Regression to the mean is added to the mix because each series is implemented when there is an "excess" in the oppostie direction; if you are playing baccarat at the minimum level to keep your seat, and playing Banker, your series starts when Player has won three coups in a row. The new series uses your "normal" betting unit, rather than the token wagers used to stay in action. The effect is similar to backcounting in blackjack; the tendency is to bet more in positive expectation situations.
Yes, we are well aware that it is "mathematically impossible" to gain an advantage using a Labouchere. Yes, we are well aware that the Gambler's Fallacy is a belief in another impossibility. We have no interest whatsoever in debating the situation. However, in the real world, outside the theory, and the forums, and the "expert opinion," there are a number of very adept professional bettors who are laughing all the way to the bank with their winnings, and have done so for a number of years with a regularity that would give a casino pit boss a fit of hysteria if known.
Good Luck!
<snip>
In addition to the areas explained below, there is a lot of confusion about the
statement that "patterns" exist in what are normally considered random-variable events with no cause-and-effect relationships. The classic example is the question, "If you are flipping a (normal) coin and it comes up heads 10 times in a row, what are the odds that it will come up heads in the 11th flip?" The answer, of course, is 50-50, or a 50% probability.
However, that is ONLY for the 11th flip. Because of a phenomena called "regression to the mean" that has written about elsewhere on this site on a number of occasions, it is slightly more likely that in the next sequence, there will be (again, slightly) more tails than heads. The number in the sequence varies; it may be the next 10, or it may be the excess number of heads in the small sample were in fact "regressing to the mean" to even out an excess number of tails in previous flips.
The application of regression to the mean has enabled a number of very sophisticated bettors to turn a number of casinos into "cash cows" using a fairly simple technique that builds on the Labouchere "cancellation" method originally developed for roulette.
The advantage gained by regression to the mean may be slight, but in conjunction with a Labouchere wagering strategy applied to baccarat, chemin-de-fer, punto banco, or Bank Craps, it is sufficient to enable substantial profits to be derived from situations that the casino personnel believe "impossible."
In fact, the belief in the "Gambler's Fallacy" as a sucker theory is so highly-developed that casinos often install colorful "result trackers" on roulette tables, with the outcome of the last 15 or so coups brightly visible to all who care to look. The idea is that the gullible tourist will see that red has won the last half dozen coups, be convinced that black is "due," and wager accordingly.
How It Plays Out In The Real World
The Labouchere wagering strategy attempts to slightly increment wagers after a loss to increase the amount returned on the wins; the variation is slight, in most cases, and many have used it over the years to win modest amounts with grinder play at roulette. Others have modified the method to use at baccarat and Bank Craps, with substantially improved return.
The modification is simple, and can be as effectively used by competent blackjack players as by baccarat or Bank Craps bettors. The Labouchere uses 1-2-3 as a "series" of wagering units. The two outside digits are wagered (4). If the bet wins, the next wager is the remaining digit, (2). If that is won, the series is completed with a net gain of 6 units, and a new series is started. If any wager is lost, the amount wagered is added to the end of the series, and the next wager is again the two outside digits. Wagering continues until the series is "cancelled," with the associated profit of 6 betting units.
Regression to the mean is added to the mix because each series is implemented when there is an "excess" in the oppostie direction; if you are playing baccarat at the minimum level to keep your seat, and playing Banker, your series starts when Player has won three coups in a row. The new series uses your "normal" betting unit, rather than the token wagers used to stay in action. The effect is similar to backcounting in blackjack; the tendency is to bet more in positive expectation situations.
Yes, we are well aware that it is "mathematically impossible" to gain an advantage using a Labouchere. Yes, we are well aware that the Gambler's Fallacy is a belief in another impossibility. We have no interest whatsoever in debating the situation. However, in the real world, outside the theory, and the forums, and the "expert opinion," there are a number of very adept professional bettors who are laughing all the way to the bank with their winnings, and have done so for a number of years with a regularity that would give a casino pit boss a fit of hysteria if known.
Good Luck!
