Technical Analysis and Gambling Returns

[Alan Mendelson]

I am just wondering if anyone has ever tried to use stock market technical analysis to help guide them in their casino gaming?

Technical Analysis or TA is the study of price charts for stocks and commodities, and from the patterns of those charts, "technicians" can predict the future price movements of those stocks or commodities.

The proponents of TA say stock market charts are like EKG graphs of the heart and can also show the health of a stock.

I learned TA from one of the best -- Stan Weinstein who was the publisher of The Professional Tape Reader book and investment newsletter. Back in the 1980s when TA was very much in favor he was frequently quoted on the news and appeared on various stock market TV shows including PBS' Nightly Business Report.

Weinstein developed a TA theory that said stocks had four stages:

1. A base building stage
2. A growth stage
3. A topping off stage
4. A decline stage

He said if you looked at stock price charts you can sometimes detect these stages and the points at which a stock will "break out" to move higher, or a point where a stock will "break down" to decline.

What has this got to do with gambling?

Well, Stan Weinstein who I knew from my days as the business reporter at WTVJ in Miami told me that TA could be applied to anything. He said everything had these four stages: base building, growth, topping off, and decline.

Last night I went to Casino Morongo and I posted about the visit on the California Casinos forum. My short trip there perfectly matched Weinstein's four stages which made me ask if anyone else has used TA for casino gaming or if they see any resemblances to the markers or break out and break down points of TA?

Let me first go into detail with what happened with me. I was playing 7/5 $5 Bonus Poker and I started with $300 in the machine.

Stage 1: Base Building
With $300 in the machine I hit some small break even hands, and stayed in the range of $100 to $300.

Stage 2: Growth phase
After playing a short time with my original buy in, I hit quad 4s for $1,000 and this was the start of my growth phase. Just two hands after the 4444, I got quad tens for $625 which gave me a profit of about $1800. At this point I raised my "stop loss" to $1300 which would have locked in a profit of $1,000 on the session. But my growth phase wasn't over. I hit some small wins and break even hands, and some losers of course, and then 4444 a second time.

Stage 3: Topping Out
At my peak I had $2650 on the meter (remember, only a $300 buy-in) and I never surpassed that. I played for about ten minutes with the meter staying in the range of $2200 to $2550. Several times I would fall back to $2200 and then would recover but never surpassed $2550. $2550 because my "top" and then I dropped back to $2350 and pledged to myself that if I would get back to at least $2500 I would cash out. Well, I did get back to $2500 but not to $2550. Had I surpassed $2550 even once then TA would tell me that this was not a "top," but I never did get above $2550. So I cashed out at $2500.

Stage 4: The Decline
Of course I wasn't around to see if I really would have had an actual decline had I kept playing my $5 Bonus Poker. But I wasn't going to take the chance. For too long I was stuck in the range of $2200 to $2500 and in TA as stated by Weinstein that's a sign to get out.

So, that's how I applied stock market technical analysis to this particular video poker session. It opened my eyes to the possibility of it and in the future I will watch for similar trends.

[redietz]

I think Weinstein was yanking chains with a wink.

Base building.
Growth.
Topping off.
Decline.

Sounds like something to me that has nothing to do with the stock market. Plus Alan calls it TA theory. Alan, my good man you forgot the &, as in T&A Theory, which usually leads to base building, growth, topping off, and decline.

Meanwhile, if I had a nickel for everybody who thought the secret to gambling lay in stock market jargon....

[arcimede$]

Alan, stocks are dependent upon many factors. There is of course the value of the company itself. There is market emotion. There is competition.

There is nothing like this in video poker. VP is random. Every hand is an independent event. The math for this kind of activity is well known. You can try to put this square peg in a round hole and you will waste a lot of time. You already did in writing this post.

[Alan Mendelson]

I haven't drawn any conclusions but redietz and Arc already have. Anyone else?

[redietz]

I come into the topic with a bit of a bias. Alan, I'm sure you don't know this, but quite a few people have tried to transition to sports betting from Wall Street, and they usually think they are bringing fresh ideas and modern techniques to an old fashioned enterprise. But of course they are not.

Some of these folks have introduced jargon that has become assimilated by the sports betting culture at large, which is fine with me. One way to know if someone understands what they are discussing is by how little jargon they use.

Now some of these Wall Street-to-Bettor folks have been superficially successful, that is, they appear to have accomplished very extraordinary things, and they have achieved high profiles. Close examination, however, yields other conclusions, sometimes dramatically reversed conclusions, but very few people are aware of the up close flaws.

So I bring a bit of cynicism to any Wall Street gambling analogies. Rob, by the way, knows what I'm talking about, as he is no fan of some of these folks, either.

[Alan Mendelson]

Well I discussed TA with Rob before I posted this. He didn't know about it. It would require charting your credit meter as you play. I'll have to chart some to see if the application works. I am more open minded than the rest of you, it seems, which is perhaps why I had a career in journalism.

[RS__]

Alan is open-minded!

[Alan Mendelson]

Alan is open-minded!

I question. And because I do, the government figures the Consumer Price Index differently, it reports the nation's Unemployment Statistics differently, it reports Housing Starts differently, and that's why I have an Emmy and the Janus Award for Economics reporting, and why I made the White House "reading list". My investigation into gasoline retailing also caused New York State and other states to change the consumer protection laws for gasoline retailing.

You are an AP, who deals cards in Vegas, and writes on website forums about casino gaming.

[RS__]

No need for the attempted put-down, Alan. I just thought it was funny you wrote that.


Anyway, what would be the purpose of this TA graphing and 4 stages stuff? How would that help in gambling? You said something about watching/looking at trends. Trends are great - you can look in the past and see how you / the game was performing in the past. You can't look at a trend in a random event and expect anything to happen relating to that event. ie: If you were up quite a bit and the trend was upwards, you wouldn't be able to expect the trend to continue going up, stay the same, or decline -- at least not due to the upward trend.

[Alan Mendelson]

RS__ as I mentioned, Stan Weinstein said to me years ago that "anything" can be charted and technical analysis could be used to find the trends in anything. It stuck me how at Morongo the other night my play that night matched three of Weinstein's four-stages perfectly. I cashed out during what would have been his "topping action" or trend #3 which comes before the big decline. Below is a photo of Weinstein's 4 stages.

What I experienced was a short stage 1 where my original $300 ranged from $100 to $300, then the quad 4s, the quad 10s, followed by another quad 4s for Stage 2. Then my stage #3 was a period where I ranged from $2200 to $2650 on the credit meter, and I cashed out at $2500 before the Stage #4 downtrend would begin.

What I want to do in the future -- and I ask others to do it also -- is keep tabs of their own results to see if they see similar patterns? What happened to me might have just been a fluke.

[RS__]

Just because someone (no matter how intelligent he may be) said it can be applied to anything, doesn't mean that's true.

I'm sure we've all had plenty of sessions that just go straight down into the toilet. Most sessions, no.

But most sessions don't follow the base building - growth - flat line - decline model. They are all over the place and unpredictable.

Each event (hand) is independent from another hand, in the past or future. (Exception being on a variant game, like UX, where you build multipliers for the following hand, when hitting a paying hand.)

Is this TA stuff theory, as in "it could be applied to VP, not sure"? Because it certainly seems like you're saying it is applicable to VP.

[Alan Mendelson]

I didnt know what video poker was when I had this discussion with Stan Weinstein.

[arcimede$]

Alan, if you think having a open mind is a good thing when someone claims 2+2 = 5 then I will just sit back and chuckle. Face-palm.

[Alan Mendelson]

Alan, if you think having a open mind is a good thing when someone claims 2+2 = 5 then I will just sit back and chuckle. Face-palm.

What response did you expect?

[regnis]

as RS said, TA is theory. Kind of like EV and the "long term".

[RS__]

What response did you expect?

Perhaps you shouldn't have made up the whole "being open minded" thing. If anything, I'd say you were stubborn.

[Dan Druff]

Alan, stocks are dependent upon many factors. There is of course the value of the company itself. There is market emotion. There is competition.

There is nothing like this in video poker. VP is random. Every hand is an independent event. The math for this kind of activity is well known. You can try to put this square peg in a round hole and you will waste a lot of time. You already did in writing this post.

100% correct

[Alan Mendelson]

I started this thread with the words "I am just wondering" and I am still just wondering if technical analysis can be applied to video poker and to gambling in general.

Last night Jason and I drove to Morongo to play a little. Dan when you and I were texting each other and I said my cell battery was low it was because we were in Jason's car and his car charger does not fit my phone.

When we got to Morongo I charted my play, starting with $1,000 on the $2 7/5 Bonus game. With $200 in the machine I played for a few minutes and my credit meter stayed within a narrow range (Stage 1) and then came my first quads (2s) and this "break out" signaled the start of Stage 2. A few hands after quad 2s, I got AAAA for $800, and then my meter was stable for a few minutes until I got 2222 again keeping stage 2 intact.

Feeling confident that I was still in Stage 2, I switched to $5 on the same machine and had some losses but still kept around my $1,000 starting point -- and then quad Aces again for $2,000.

Unfortunately this is where my "charting" stopped. While I was playing VP, Jason was playing Ultimate Texas Hold'em and he came back to me just as I was getting the hand pay with about $5500 in chips after a $400 buy-in. He said "we're leaving now" (he didn't want to risk losing it back) and I couldn't argue.

I went from $1,000 to $3,000 on the night.

[arcimede$]

as RS said, TA is theory. Kind of like EV and the "long term".

EV and statistical analysis are hardly theory. It is proven mathematics.

[arcimede$]

What response did you expect?

Some of us live in the real world. Others ..... Oh look, da plane, da plane ....