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The evidence suggest that Leeson (see Warren Buffet's bet) followed an old gambler's strategy of "just double your bet when you lose. This seems like a fool proof approach.

Think about tossing a coin, heads you get a dollar, tails you lose a dollar.
If you lose a dollar, next time you bet $2s. That way if you win you recoup
your losses. If you lose again, you bet $4's. If you win you recoup all your
previous losses. If you lose again, you bet $8, etc. Well eventually you'll have to win, so by this method, you'll regain all you're losses and make $1. This sounds like a great way to invest. Not so fast. That's what Leeson did, and his bank went under.

It's true that if you can go 10 rounds, you have a 99.9% probability of making $1. But what about the 0.1% chance that you'll lose even after 10 rounds? Well then you'll have to pay out more than $1000! Want to take that risk? In the case of Leeson, at some point he maxed out the available billions he had, and the game was over.

On average you don't make money doing this. The best that can be said for this strategy, is that you rarely lose. If you could invest all the money in the universe, then it'd be very unlikely that you'd ever lose, but if your cap is your retirement fund, do you really want to risk that? It depends on your personality and your appetite for risk.

Also consider this as a once in a lifetime gamble, and as a regular strategy that you pull out of a hat, when you're doing badly. As a once in a lifetime-crazy thing to do, it's one thing, but using it frequently, is courting disaster, and you will eventually end up losing everything.

This website is here to educate you as to how to manage risk. Use our stock market software, free with registration, to help you understand the relation between stocks. Hopefully this will help you avoid making unwise investment decisions. Our aim is to ensure you don't fall for unsound strategies such as "just double your bet when you lose".