Probability, Odds and the House Edge

Have you ever wondered how casinos make money in a business that lets players win money? The answer lies in odds and probability.

Simply defined, probability is how often an event will happen. To measure the probability of a thing, you compare the number of instances it can happen to the number of instances it cannot happen. What is the probability of a coin toss ending with heads up? There are only two possibilities here: heads or tails. So the probably is 1 in 2. In terms of odds, we say it is 1/1 or 50/50.

Now in gambling, two types of odds concern us: the odds of something occurring, and the payout odds if you bet on it to happen and you win. In gambling games, there is a discrepancy between the two that is disadvantageous to the player. This discrepancy is what causes the house edge. In other words, the casino makes money by paying you less than your winning bet is really worth (based in the odds).

To give an example: A single-number wager in European roulette has a 1 in 37 chance of happening since there are 36 numbers plus a 0; that is, a 36 to 1 odds. But the payout is only 35 to 1, a one-unit difference. This difference amounts to a 2.7% house edge since 100% / 37 = 2.7

In American roulette, there is a 00 aside from the 36 numbers and single 0, yet the payout odds for a single-number bet is still 35 to 1. That puts the house edge at over 5%.

Casinos are guaranteed to make money since probability is a mathematical fact that cannot be changed. Sure, in the short term, anything can happen. A player can get very lucky or very unlucky. But the longer they play the same game (not necessarily on the same gambling trip - just over time), the more the results will match the odds for that game. This will happen even if you use betting systems, good luck charms or whatever. Probability is not influenced by guesses, hunches or luck.

Now that you know how probability and odds work, you should look for games with favorable odds and play only those. Look for games with very high payback percentage, the higher the better. Payback percentage is the converse of the house edge. It is what players get back as opposed to what the house keeps.

As far as payback percentage goes, your best bets are blackjack, poker and video poker. In blackjack you can sway the odds in your favor through card counting and other strategies. Video poker uses strategy for holding/discarding hands. Poker is different in that it is a human-vs.-human game where the most skilful player can win. The house only takes a rake in poker.

This is why you see professional gamblers playing these three games. Slots, keno and roulette have such poor odds that no advantage can be won from them even with comps. Now it's not so hard to choose a game to play, is it?