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House Edge

The casino house edge is a mathematical advantage that the casino has over the player in a given game of chance. Along with the rake in poker and baccarat (the scaled commission fee that the cardroom takes for operating the game), the house advantage is the reason casinos make profits. With the legal right to set a house edge on its games, a gaming company makes enough profits to afford large staffs, opulent hotels, tourist attractions, concerts and shows. It is the profit engine of the casinos. 

Having a better understanding of the casino’s advantage makes you a more informed gambler. Not only does knowing the house edge improve your chances of winning in many cases, it also helps you avoid the logical fallacies that can lead to problem gambling. 

How to Calculate House Edge

The casino house edge is expressed as a percentage that indicates how much a player expects to win in payouts when the player wagers a theoretical $100. If a player expects to win back $99, then the player would be expected to lose $1 and the house edge would be calculated at one percent. If a player expects to win back $93.50 for every $100 wagered, then the casino would be expected to win $6.50 and the house edge would be expressed as 6.5 percent. If a player is expected to win back $101 for every $100 wagered, this would be stated as 101 percent expected return and no house edge would exist. (The house edge always exists. If not, casinos would be broke.)

Basically, the house edge is the profit the casino makes on each bet so they don’t go out of business. Learning how to calculate house edge requires an understanding of basic casino math.

Positive and Negative Expectation

When the expected return is greater than 100 percent, then it is considered a positive expectation game. The player would have the advantage over the casino at this point. This only happens when video poker uses the full-play pay table, a player is successfully counting cards in blackjack, or a progressive jackpot has grown to such proportions that the amount won is greater than the amount which would need to be wagered to expect a 50 percent chance of winning that jackpot. Again, these are rare cases. Most players should expect to gamble on negative expectation games. In these cases, they will face the casino house edge.

Connection to Expected Return

The casino house edge is connected to the payout percentage. Among manufacturers of gaming machines, the payout percentage is also called the “return-to-player” or “RTP.” The RTP is expressed as the amount the casino returns to the player or, essentially, the amount the player expects to win back from the casino. 

Let’s pretend that you expect to win back $99 of a theoretical $100 wagered. Then the expected return would be 99 percent. When you expect a return of $93.50, then the RTP or expected return would be 93.5 percent. 

An easy way to picture the connection between the return-to-player and the house edge is to add them together. When playing a negative expectation game, the house edge and the payout percentage add up to 100. If you have a 99 percent RTP, then the house edge would be one percent for a total of 100 percent. 

Casino House Edge Variance 

Even though the casino has a probabilistic advantage, we are dealing with probabilities, not certainties. Variance happens in the course of any casino game. It is how much the results differ from the expectations.

This can be measured, but in the simplest terms, variance means sometimes you will win back more than 100 percent of what you wagered (and thus, have a winning session) and sometimes you will lose a whole lot more than what you expected to lose. As the saying goes, “There’s no I in team but there is an I in casino.” Just kidding. The real saying is “results will vary.” 

Odds vs Results 

In real life, the results are going to differ from the predicted house edge most of the time. These deviations should be expected when looking at short-term results. The longer a gambler bets, the more likely the real-life results will converge with the odds of winning and losing. If you played a billion hands of blackjack, then your results would conform pretty closely to the odds of the game.

What sometimes trips up gamblers is their perception of the terms “long term” and “short term.” Players often assume a few thousand hands (or spins or dice throws) represents long-term results. In truth, a few thousand bets is a pretty small sampling.

Online Casino House Edge 

When it comes to online casinos, you can also figure out how to calculate house edge the same you would for a bricks-and-mortar casino. The online casino needs to make a profit just like a bricks-and-mortar one would, and the house edge is expressed the same way, as a percentage.

Can I Beat the House Edge?

Sorry to be the bearer of bad news, but there is no way to beat the house edge. The only way you could come close to beating the mathematics of gambling is to get lucky. Casino games are games of chance and completely unpredictable. In order to beat the house edge, you’d need to have unlimited funds and time. This is fine if you’re Batman and need to blow off some steam at the casino after a long day of trying to catch the Riddler. But for the rest of us, it’s best to gamble responsibly, forget about the house edge and have fun placing your bets.