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The Mathematics of Gambling: Understanding the House of Edge

Gambling house of edge winning

Have you ever seen someone win millions from a casino and wondered if that could result in the downfall of the casino? Casinos prepare for such instances long before they start operating. Before a casino offers you a million dollars in prize money, it already has the money to back the offer. Moreover, it has figured out how to profit from such a prize pot.

And it will likely take more home than you will from the same win! Whether you’re playing at a physical casino, an online casino Australia, UK, Europe or anywhere in the world, understanding the mathematics behind the house edge is crucial to managing your earnings and avoiding the pitfalls of problem gambling.

What is House Edge?

You’ve likely heard that the house always wins. But how does this work? Let’s look at it this way. Casinos must make money to remain profitable enough to pay their leases, wages, and other expenses. So, if they allowed players to win back all the money, they would soon be out of business.

So, they incorporate a certain percentage to every wager, allowing them to profit from each wagered amount. For example, the edge of a game could be 5%. That would mean that for every $100 spent on the game, the casino could keep $5. It seems like such a small amount of money. But once you consider that a casino likely gets at least $100,000 in wagers daily, this amount becomes quite considerable.

Does the 5% kickback mean you get to keep 95% of your wager? Not quite – this is where it gets interesting. When you wager, you are subject to two factors:

  1. The House Edge: Depending on the house edge, the RTP (return to player) can be anything from 70% to 99%. So, in a game with an edge of 5%, you can keep your 95%.
  2. The Outcome: Games have different outcomes. And you can either win or lose. Suppose you lose. You won’t get this money even if the game has a 95% RTP. And if you win, you can win more than 95% of what you wagered. You can even win 100 times the initial amount.

The culmination of these factors determines the outcome.

Does the House Always Win?

Often, people use this saying to explain the casino earnings, citing that the casino always has the upper hand. But that is not entirely true. Every casino will incorporate an edge which they state in each game. For example, if the edge is 5%, the casino knows it will make at least 5% off the wagers on that game. And depending on how much it pays out in winnings, it could make a bigger percentage. But given this technique, players do have a chance of winning considerable amounts.

How to Take Advantage of the House Edge

The house edge determines how much your wager plays a part in your earnings. So, how can you use it in your favor?

  1. Play games with low edges: The lower it is, the more your money finances the payout. It thus becomes more profitable to wager even small amounts.
  2. Stick to sites with licenses: Licenses not only give sites the right to operate but also subject the casino sites to regulation. Therefore, such sites abide by fair gaming rules and do not alter the edges or outcomes to get ahead of the players.
  3. Learn the game’s rules: Even when the edge is on your side, you cannot get far if you don’t understand how the game works. Take time to read the rules. And don’t stop there – practice the game as much as you can to get a feel of how it works.
  4. Wager small amounts at first: Seeing that a game has a low house edge does not mean you’re guaranteed to win. It only means that the house makes less from each wager. So, start with small wagers as you understand the game before moving on to bigger ones.

Also, take advantage of bonuses and rewards. They lower your capital, so the house edge does not affect your payout much.

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CEO & Editor
I'm Ved Prakash, Founder & Editor @Newsblare Media, specialised in Business and Finance niches who writes content for reputed publication such as Investing.com, Stockhouse.com, Motley Fool Singapore, etc. I'm the contributor of different... news sites that have widened my views on the current happenings in the world.

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