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Understanding The House Edge

The basics of gambling are really quite simple. Although the rules of each game are different, the fundamental principle is essentially the same for all of them. Whether it’s a Blackjack hand, a spin on the roulette wheel, a roll of the dice on the craps table, or a spin on the slot machine, players place a bet and are betting against the casino (also known as the house). When the players lose, the house takes their bets. When the players win, the house pays their bets.

In principle, that’s pretty much all you need to know to start playing. Of course, you will also need to know the rules for any specific game you want to play, but they are generally quite easy to learn. However, in our opinion, at least, it’s worth having a basic understanding of how the casino game works.

Specifically, you must understand how they make money and be familiar with the concept of home advantage and payout percentages. You should also understand why players are likely to win money even if the odds are against them. We explain all these things on this page.

The house edge

Now we are going to use an example to show how the house edge works in practice. Let’s say you were playing roulette and betting $ 1 on a single number for each spin. A roulette wheel has 37 numbers (European version) or 38 numbers (American version), so you have 1 in 37 or 1 in 38 odds of winning your bet. We are going to use the European version for this example.

Theoretically, you can expect to win your bet once every 37 spins. In practice, it does not work exactly like this, due to the standard deviation and the difference that we explain a little later, but in the long term, each number should rotate approximately once every 37 turns. For the sake of this example, we are going to work on the basis that each number appears exactly once every 37 turns.

If a casino offered true roulette odds, then players must achieve long-term equilibrium, and the casino would not make money. They are in business to make money, so the house edge is very important to them.

The true odds for a single number bet on roulette are 36: 1. If you were offered these odds, then your $ 1 bet would return a total of $ 37 if you win: $ 1 of the original bet plus $ 36 in winnings. Now, because such a bet must win every 37 laps, then your expected losses would be zero. During 37 spins, you would bet a total of $ 37, making a profit of zero on 36 spins and a profit of $ 37 on 1 spin and, therefore, the break-even point.

However, the actual odds offered by a single roulette bet are 35: 1. So for 37 spins, you would still bet a total of $ 37 and still lose 36 spins at the cost of $ 36. Your winning play, however, will only give you a profit of $ 36 for a profit of $ 35. So your Expected losses for every $ 37 wagered are $ 1. $ 1 as a percentage of $ 37 is 2.7%, making the house edge for this game 2.7%. Another way of looking at it is that the payout percentage of the game is 97.3% (100% – 2.7%).

The house edge/payout percentage is the same regardless of what bet you make in the game. This means that for every $ 100 wagered on roulette, the theoretical profit of the house is $ 2.70, while a casino wouldn’t exactly make $ 2.70 for every $ 100 wagered over millions of spins it would average approximately that number.

It should be noted that the house edge is not the sme in all games, and there is an obvious advantage in playing games where the advantage is low. In theory, the lower the house edge, the less you will lose over time. Therefore, the size of the house edge is something that you should take into account when deciding which game to play. However, it should not be the only consideration, as some of the games with the biggest house advantages also offer certain advantages.

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