In this Market Measure segment, Tom Sosnoff and Tony examined the gambler's fallacy and its impact on trading decisions. The segment highlighted how this cognitive bias leads traders to believe patterns will continue or reverse based on past outcomes of independent events.

Using a 10-year study of SPY 16-delta strangles at 45 DTE, the hosts demonstrated that increasing position size after losses doesn't improve profitability but dramatically increases risk exposure. Data showed managing positions at 21 days significantly reduced volatility compared to holding until expiration.

The key takeaway: after winning or losing streaks, probability remains unchanged. Traders should maintain consistent position sizing and management strategies rather than "doubling up to catch up.