The Tall Tale of Martingale (Part 4)

Given unlimited capital, a Martingale betting system is guaranteed to make money because no matter how extreme the losing streak, at some point I will win. Casinos employ two additional tactics to make sure this does not happen.

I have described at length how large the next bet can become relative to the initial bet during an extreme losing streak.

If this doesn’t sound dire enough already, here’s the kicker in the world of Vegas: even if I have enough money to cover the next double, at some point I will not be allowed to. On a $5 [maximum payout] table, for example, casinos will usually limit the maximum bet to $500-$1000. After eight consecutive rounds of bad luck, I will no longer be able to recoup my losses with the next bet. I might therefore have to win two consecutive games with large bets to end up net positive.

Probability of profit decreases markedly if I must win multiple times in a row to recoup my losses.

The martingale gambler is targeted further by casinos that also raise the minimum bet. Martingaling relies on the number of times I can double while still remaining within table limits because I am always less likely to lose (n + 1) consecutive times than I am to lose n times in a row. I could simply play at a table with a larger maximum bet except typically the minimum bet is proportionally larger as well. This maintains the same number of betting doubles before table limits are reached.

Here’s the bottom line: if I lose enough times in a row with a Martingale betting system then I will go broke and not have enough money to continue or I will reach the table limit. While martingaling can work in the short term, the longer I play the more likely I am to encounter an extreme losing streak forcing a meeting with my demise since I will be prohibited from raising my bet high enough.

In Vegas and on Wall Street, there is no free lunch despite an occasional illusion to the contrary.