Games of chance: Learn about payout ratio and variance

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In the next few days, we will describe some principles that can be applied to almost any game of chance in which a player plays against the house. In other words, all games where a casino collects bets and pays out potential winnings. The most famous of such games are slot machines, roulette, blackjack and baccarat, but there are many others.

Most of you probably know that these games are somehow set to give casinos a certain advantage in the long-run. Otherwise, the owners of the casino would be losing money on them. This advantage is also known as a house edge.

The advantage of the casino is determined by the rules of each game and by the payout rules in the case of winning. If these rules are applied over many, many rounds (sometimes even hundreds of thousands of times), casino owners can be quite certain that the sum of bets collected will exceed the total amount of wins payed out. The statistics work in favor of the casino in the long-run.

In spite of long-term statistics working against you, it's quite common to come to a casino, play, win, and leave with your winnings. The main reason is that your visit to a casino consists only of several tens or hundreds of game rounds. In this case, the statistics don't have enough time to converge (show up). The outcome of your casino visit is then more determined by chance (or by your luck, if you want). It's exactly this chance which helps lucky players win and beat the statistical advantage of the casino, although just in the short term.

To increase the chances of "beating the statistics", it's very important to know two basic characteristics of each game – payout ratio and variance. That's exactly what we'll focus on the next days.

We'll go through:
  • Payout ratio (RTP)
  • Variance (volatility)
  • RTP of a betting system
  • Conclusions

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