The Beginner’s Guide to the Casino’s House Edge

By Randy Ray
Published on August 07, 2015
Poker Chips And Playing Cards

I’ve written this guide to give beginners to casino gambling an overview of how casino games work and how casinos stay profitable. I’ve always approached hobbies from the perspective that knowing more about the activity makes it more satisfying. Most casino players don’t do enough homework to get 100% satisfaction from their play.

You’ll find plenty of other guides to casino gambling online. Some of them are more detailed, but a lot of them leave out some of the most important facts that you need to understand. I felt like I could fill that gap with a relatively short blog post about the casino’s house edge.

The House Edge

If you watch TV or movies, you’ve at least seen casino games in action on a screen. You know what a slot machine is, and you can figure out roulette and blackjack. But the most important fact about all of these games is the house edge.

This is the math that ensures casinos’ continued profitability. People who don’t understand the house edge get the mistaken idea that they can win in the long run against the casino.

They’re wrong about that.

All casino games are set up to offer payouts which are somewhat less than the true odds of winning the game.

The easiest example to understand is the roulette wheel. You can get even odds on a number of bets on a roulette wheel: red/black, even/odd, or high/low.

At first glance, it seems like half the results are going to fall into one of those categories, so it looks like you’re playing a fair game. If you play long enough, you think you’ll eventually break even.

But look a little closer at that wheel. Two of the slots are green and have a 0 and a 00 in them.

Those two slots turn the game into a guaranteed money-maker for the casino. They provide the casino with its house edge.

A roulette wheel has 38 pockets where the ball can fall. Two of them are green, eighteen are black, and eighteen are red.

Over 38 spins, you can expect:

  • Two greens
  • Eighteen blacks
  • Eighteen reds

If you bet black every time, you would win eighteen times. But you would lose TWENTY times, because of those two green pockets.

In the short run, anything can happen, and you might even make 38 bets on black in a row and come out ahead. But the casino operates on this principle:

The more events you have in a series of bets, the closer the actual results will get to the expectation. In a casino where ten players are playing at two roulette tables for 24 hours a day, the casino is seeing 480 man-hours of play.

If each player wagers 20 times per hour, the casino sees almost 10,000 wagers. Over a month, that’s 300,000 events.

When you start getting into numbers that high, the casino starts seeing their actual results resemble the mathematical results they expect. Suppose all of the players’ bets were on black.

The casino would win about 53% of those bets, and the players would win about 47% of them.

Roulette is just a single example. Every other game in the casino offers a payout that’s slightly less than your odds of winning.

Over a lot of players and a lot of wagers, the casinos are almost guaranteed a profit.

Gambling Machines

Slot machines are the most popular example of gambling machines in modern casinos, but video poker is almost as popular—at least in the United States. You can find machine game versions of other table games, like video roulette and video blackjack, but those machines haven’t caught on in the same way that slots and video poker have.

Slot machines can be a lot of fun, but they have a house edge just like every other casino game. Here’s an example of how slot machine math might work. I’ve created a super simplistic rule-set for this example, so that you can get an idea of how the math works:

You have three reels with ten symbols on each reel. You have an equal chance of any particular symbol coming up on any given reel (1/10). Your chances of lining up any specific set of three symbols are 1/10 X 1/10 X 1/10, or 1/1000.

Your chances of getting any symbol at all to show up as three in a row are 1/100—it can happen in 10 different ways, so it’s 10 times as likely.

Suppose the casino paid out 90 coins any time any symbol lined up three in a row.

It’s not hard to see how the casino would stand to make money from that machine all day long every day, is it?

Of course, modern slot machines are more complicated than that, but all the casinos and slot machine designers have to do is make sure that the payouts for any given combination are less than the odds of winning that combination. If they do that with every combination, they maintain a percentage edge over the player.

Video poker, on the other hand, is based on a deck of 52 cards. The odds of getting any particular hand are the same as if you were playing with a real deck of cards. You get paid out based on a pay table which lists the payouts for the various hands.

This too, provides the casino with a percentage advantage over the player. If the casino knows that the player has a 21% chance of getting a pair of Jacks on a video poker game, and they pay that hand out at even odds, then the casino makes money in the long run.

Which game is better for the player, though?

Video poker is the better game, mathematically, although the house edge depends on the variation you play. But even the worst video poker pay table offers a lower house edge than the best slot machine game.

This doesn’t mean you have to play video poker instead of slots. You just need to understand that you’re sacrificing a few percentage points to the house when you do.

If you enjoy slots more than video poker, more power to you.

Table Games

Blackjack, craps, and roulette are the most commonly played casino games. But a bewildering number of new card games based on poker roll out constantly in casinos.

Blackjack is probably the easiest table game for a beginner to play, just because most of us played some version of it at the kitchen table with our parents when we were young. The house edge on blackjack is excellent when compared to most other games in the casino, too—but only if you play with the correct strategy.

If you just follow your hunches, the house edge on blackjack is about 4%. But if you learn the correct strategy, you can reduce that to less than 1%.

You can have a lot of fun for a long time in a casino when your expected loss for each bet is only 1%.

Roulette is easy, too, and it requires no decisions. But the house edge is much higher. A standard American roulette wheel has a house edge of 5.26%. The betting action couldn’t be easier. Just ask the croupier (the dealer) for help if you’re confused, and you’ll be off and running.

If you stick with the roulette bets on the outer edges of the betting area, your bankroll will probably last longer, too—even though the house edge on all the bets is the same.

Craps is more complicated, but it’s also more fun than any of the other table games. Your best bet with craps is to read some of the tutorials about how to play craps on this site. Then download one of the free casino software packages here, and play for practice for a little while. When you visit your first real casino, reinforce what you learned here and in your practice games by attending one of the day-time classes that the casinos offer.

You’ll be rolling the bones in no time.

Conclusion

Casino gambling is one of the most exciting and fun activities in the world, but you need to understand going into it that the house has a mathematical edge that is almost impossible to beat in the long run. If you understand that going in, you can have a lot of fun. You’ll appreciate your winning sessions more because you’ll understand how relatively unusual they are compared to your losing sessions.

And you’ll budget your money better.

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