Understanding the house edge
It is true that casinos make a profit with every bet players make. It is also true that casinos pay off bets at lower than the actual odds. This is known as the house advantage or house edge. Knowing how the house edge works against a player is crucial when one's goal is to hit the jackpot.
The amount of money required to play a single game or round in relation to the house edge is called Expected Value or EV. EV is the average outcome which is determined by taking the average amount bet and multiplying it against the number of Hands Per Hour or HPH and multiplied by the House Edge. Based on this formula, players can compute the actual EV of every hour regardless of any game played. The amount then shown is what it would cost a player to play games with a negative expectation or games with house edges.
Taking a $5 bet, the computation would be as follows:
Roulette: $5 x 50 HPH x 5.26 = $13.15 Craps: $5 x 30 HPH x 1.4 = $ 2.10 Caribbean Stud : $5 x 40 HPH x 5.3 = $10.60 BlackJack: $5 x 60 HPH x 0.5 = $ 1.50
With the figures above, in the case of blackjack, it shows a $1.50 loss. Players would sweat that they had lost more than that amount on the game tables so how is this possible?
Mathematicians point to the law of Standard Deviation. Taking the example of a coin that is flipped 100 times. The chances of the coin turning up heads or tails are 50/50. However it doesn't mean that the first flips is always tails or always heads. Perhaps most of the time, tails would get more flips that the heads. The amount of times that the coin does not confirm to the allowed number of flips per side is called the standard deviation.
A player can be one deviation away for the EV by an estimated 65% and within two different deviations 94% of the time.
Standard Deviation is measured in this manner. SD = 1.1 divided by the square root of the number of hands played.
In a play of 100 hands taking the square root of 100 is 10. It is then divided by 1.1 and then by 10 and it would total up with 11% or 11 units (11% of 100 hands). If a player plays with $5 per hand, one unit would equal also $5. The standard deviation would then be $55.
In the house edge, players would always lose more than winning. The best bet for any person who has a hard time understanding the mathematical computations of the SD and EV would be to watch ones bankroll.
