Smash Vegas

The house edge (or advantage) is the casino profit on a player’s actions, usually expressed as a percentage of the player’s bet. So if the house edge on a game is 5% then on average for each $1 you bet, the house makes (and you lose) 5 cents. It is common among certain games (e.g. slots) to express a “payout percentage”, here the house edge is 100 - payout percentage. So in our example above the payout percentage would be 95% - another way of saying this is that on average you get back 95% of what you bet.

Of course the games don’t look as if that’s happening. Casinos wouldn’t be very popular if their games were just “you hand over a dollar, we give you 95 cents back”. The reason they do work is variance - a mathematical way of saying luck. In the short term just about anything can happen, the player can be up or down significantly. However, the longer he plays the closer his losses will be to the house edge. A simple analogy is flipping a fair coin. It is common to have disproportionate streaks of heads or tails in the short term, but the more times you flip the closer the ratio will get to 50/50.

In some games the house edge depends on what the player does. A good game of blackjack has a house edge of less than 0.5%, but the player can make it much higher by playing without proper strategy (sub-optimally). Similarly the house edge may be different for different bets. In baccarat there are two even money bets but one has a house edge of 1.06%, the other 1.24%. Many games offer sidebets, these are almost always there to line the casino’s pockets as they carry a huge house advantage.

An important point to note about the house edge is that it relates to the amount you bet, not the amount you bring to the table. As an extreme example if you bring $500 to the table but place only one bet of $10 the house cannot touch your other $490. If you place 50 $10 bets then your entire $500 would be exposed and on average you would lose a number of dollars equal to the house edge multiplied by 500. More important is the case where you bring $500 and end up placing 200 $10 bets - sometimes you win and sometimes you lose so that your stake money is “recycled”. This is the normal case when you play. In the example above your $500 was bet four times over and thus your expected loss is a number of dollars equal to the house edge multiplied by 2000. This is important to remember when playing fast games like slots. In games with a house edge the more bets you make, the faster you expect to lose money.

You can never expect to win long term when the house has an edge.