The subtleties behind the house edge in casino gambling

There are quite a few things you should know about online and live casino gambling before you break open the piggybank. One of the most important is that most casino games carry a negative expected value induced by the house edge. There are a few exceptions to this rule of course. Blackjack for instance can be turned into a 0 house edge game through skill or the edge can even be reversed in some cases. Certain variants of video poker can also be turned into positive EV games through optimal strategy. The bottom line is however, that the odds are not stacked in your favor when you play against the house. Unlike in poker, where the house collects the so called poker rake off a game which is played between two players, the house has no choice but to introduce the house edge in order to generate revenue in casino gambling. In poker, the house will often reward players with rakeback, something that casinos offer too in the form of comp points loyalty programs.

Now then, this house edge theory is not a secret. As a matter of fact, every trustworthy and fair casino and online casino fills its players in on exactly how much the house edge is on any given game. They usually give you payout rates (which is a marketing-oriented move on their part, as they simply tell you you’ll win X% back of every dollar, instead of saying that you’ll lose X% of it) which are varied depending on the type of game you play. These rates are in the 97-98% range in the case of slot machines and 92-94% in the case of roulette (where different bets may carry different house edges). The house edge is public information. There’s something however that is much less known about the house edge: it is not the main source of revenue for a casino. While it may look like that, and the casinos will probably tell you it is so too, the house edge is a simple tool in a greater equation. Its presence induces a process which is really responsible for the revenue the casinos make. This revenue is called the house drop, and while the house edges are in the 1-10% range (could be much more on games like bingo and keno) the house drop is generally around 30% but it can even reach 100% depending on the player for whom one calculates it.

Here’s how the house drop works. Let’s say you walk into a casino with $10, which you plan to play on the roulette (let’s suppose there’s a 5% house edge on it to make the calculus simpler). You make your ten $1 bets and you lose 50 cents. That’s your 5% house edge right there. Of course this is discussed in general terms. You may end up with more money after your ten $1 bets, on average however and over the long run, you will lose 50 cents, so it’s mathematically reasonable to use this amount.

What happens with the $9.5 that you’ve left after your initial bets is what matters though. You decide to re-invest your money, and you make 9 more $1 bets. You lose 5% on those too. If you add that money up to the $0.5 you lost on your previous bets, you’ll see you’ve lost more than 5% of your initial $10 bankroll (as a matter of fact, at that stage you’ve lost almost 10%).

If you play on afterwards, you’ll drop even more money. If you play till your bankroll is all gone, you’ll register a 100% house drop.

Why should you play in casinos then? Because the variance offers you the chance to take down a fabulous amount of money on every bet that you make. If you do succeed in it, it’ll be up to you to walk away with the money and not let the system take it back from you. Don’t forget to choose a casino which offers you poker rakeback like benefits, as that will cut into the house edge and implicitly into the house drop as well.

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