Understanding the House Edge
The House Edge is the percentage of each bet that the Casino expects to keep for itself. To put it simply:
The House Edge is the difference between the true odds and the odds that the casino pays you when you win.
Commercial casinos set this limit themselves, so that even though they pay winners out, they come out on top over time. This means that the casino or house has the advantage. This means that the house is assured a percentage return over time, and that players are assured a percentage loss of what they bet.
A coin flip example:
When you flip a coin, the probability of it landing on Heads or Tails is 50%. True odds for this would be 1-1, meaning a bet of $1 could win you $1 profit. However, if the Casino decided to pay 95 for a winning $1 bet, this gives them a House Edge of 2.5%.
You could also consider a similar analogy in simply throwing a single dice:
The probability of calling the correct number is 1 in 6 (or 16.7%). This would give true odds of 5-1, so a winning bet should pay 5 times the amount wagered. However a Casino in this situation might only pay 4 times the bet giving them a House Edge of 16.7%.
Why is there a House Edge?
Odds are always calculated to benefit the house, not the player. Like any other business a Casino is looking to turn a profit, and their method of doing so is by building an advantage into the game. For certain options that require technique, the House Edge is not built in to the same extent, and if a skilled player delivers a perfect game, the house’s advantage approaches zero.
Definition Versus Misconception
It is important to remember that the House Edge is the ratio of the average loss to the initial bet. It is not the ratio of the money lost to the total amount wagered. The main reason that it is defined in this way is to make it easier for players to estimate how much they will lose. Working with the initial bet amount helps you to apply and consider the advantage/disadvantage ratio in every situation. For example if you were playing a game like Blackjack or Poker then you would be likely to raise your bet and thus be unable to predict how much your average wager will be.
Understanding and Measuring Risks
Although it is useful in working out how much a game is likely to cost you, it is not accurate as a measure of risk for all games. For example in Caribbean Stud Poker the House Edge is given as about 5.2% - roughly the same as Roulette. However, if you were to look at the ratio of the average money lost to the average money wagered then the risk could be understood as 2.56%, making it a far safer bet than Roulette.
How to Use the House Edge to Your Advantage
The House Edge is, for the most part, the Casino being open and honest about the built in profit they expect to make from each bet, over the long term. This transparency is a good thing for players, as it forces online Casinos to remain competitive, as they don’t want you wandering off to another site. It allows you to make an informed decision when choosing where to sign up, and in selecting games, as a quick comparison might prevent you from opting for a game with a sizeable disadvantage.
Practising and improving your technique at games that require a lot of skill can help you to narrow the House Edge. This specifically applies to options like Blackjack and Poker, when a strong strategy can reduce it to virtually nothing.
House Edge in Traditional Casino Games
Looking at specific games, the House Edge can vary greatly.
Blackjack defies the House Edge
Blackjack is not simply a game of chance as with Roulette. The odds are calculated to take into account the fact that they are fluctuating all the time as the advantage switches hands between the Casino and the player, and with each deal the odds for the remaining cards also changes. This is why players that can count cards accurately often win a lot of money.
Roulette has a built in advantage
A Roulette wheel features numbers from 1 to 36, and as such the Casino pays out 35-1 odds. However, these odds are given without taking in to account that there are 37 possible outcomes on a single 0 table, and 38 possible outcomes on a 00 table. True odds should be 36-1 or 37-1, thus the Casino has an edge of 2.7% or 5.36% respectively.
House Edge in Popular Games
To maximise winning potential players need to learn to manage the casinos advantage according to what they are enjoying. Here is a list of some of the most popular Casino games, and the House Edge you can expect to be faced with (assuming the game is played properly).