Payout Ratios And Strategies for Playing Games of Chance

Strategies for Playing Games of Chance

Want to know more about payout ratios and how variance works?

In this guide, we are going to clearly explain to you the principles of payout ratios and variance, which you will be able to apply to any game of chance.

Most people will use this guide for casino games, but you can also apply these strategies to games where you do not gamble for money. It is totally up to you. The one thing we can promise you is that if you like to real money gamble, then understanding these principles is paramount to reducing your chances of losing, which in turn will increase your chances of winning.

You will understand how the house edge works and how probability is affected by variation.

Most people will apply these strategies to games such as:

• Blackjack
• Poker
• Roulette
• Dice
• Baccarat
• Slots

The House/Casino Always Has a Winning Edge

First, in every game you play at a land-based or online casino will have a house edge. The casinos would not exist if this edge were not to their advantage. The idea of the casino is to give the players a chance to win big and have some recreational fun while the profit made from the house edge goes to running the casino and obviously giving the casino a profit because of course casinos are a business – needless to say, all businesses need to make a profit.

How is The House Edge Determined (RTP)?

Casinos can give you the ratio of winning versus losing in three different styles:

1. RTP Percentage (Return to Play Percentage): This is a percentage of return the player can expect. The game could display a house edge of 97%.

2. Casino House Edge Percentage: This is the percentage the casino is likely to win in each game. For instance, Blackjack has a house edge of around 0.5%. By the way, this would mean the RTP is 99.5%.

3. A Ratio of winning: You see this in most sports betting odds, but some games in the casino also display odds using a ratio of winning. 3 to 1. However, it is important to note that the pay-out will always be different from the odds of winning. In Roulette, you have a 37 to 1 chance of landing a single number, but you will only be paid 35 – 1.

It is simply down to mathematics. Every game has odds of a certain result being produced. The casino will make sure that when setting the odds, the edge is in its favour.

What Is Variance?

Variance may seem complicated, but in fact, it is simple to explain. You may have heard of people breaking the bank! How can this be possible if the payout percentages work in favor of the house?

This is where variance comes into play. The easiest way to explain variance is a simple coin flip. The odds of a coin landing on one side or other are 50/50. Let’s say we have a coin with heads on one side and tails on the other.

When you flip a coin, the coin does not consistently flip on tails then heads sequentially. Sometimes the coin will land on tails 10 times in a row. The odds of this scenario are very low, indeed, but it can happen. You can flip the coin another 40 times, and slowly heads side of the coin begins to land more often.

After 50 coin flips, the heads side of the coin could be ahead of tails by 32 to 18 even though the first 10 flips landed on tails. Now, in theory, probability says it should be an even 25 and 25 after 50-coin flips, but in reality, variation plays its part, and so the 32 to 18 result stands.

Upswings Versus Downswings

After another 100-coin flips, tails could be ahead again. Anyway, I think you get the picture now. Casino games may have an edge that pays in favor of the casino, but if variance works in the player’s favor, then the casino will end up losing.

Imagine you were placing bets on these coin flips. You can see that there would be quite a few upswings and downswings. In the case of flipping a coin, the eventual winner would be based on luck, assuming those playing agree on an even split. This is if one person agrees to stick with tails, and the other agrees to stick with heads through the entire session.

Introducing A Betting System to counter variance

This is where a simple game of flipping a coin can get quite interesting and more exciting. Let’s say before each coin flip you take in turns to call heads or tails. Some more determined/mathematically minded players may use a betting system/strategy to counter the variance that affects the 50/50 probability involved in the game.

Casino Players Often Use Betting Systems

Seasoned casino players often employ betting systems to counteract variance versus the house edge. In the game of heads or tails above there is no casino. That said, imagine the person that owns the coin is the host. He or she agrees to return 190% of your bet for every coin flip you win. However, takes 100% of every loss.  Every $1 you bet, you win $1 back plus $0.90 on top.

Strictly speaking, you are losing out in the long run because the host of the coin has set a house edge of 10%. You may agree to do this because you have a betting system in mind that could work in the long run over the session.

We will cover betting systems and their importance in a lot more detail in later sections below.

Roulette House Edge/RTP Determined

For example, if you make a ‘straight bet’ playing roulette (meaning you bet on a single number), there is a 1 in 37 chance of you winning. That is because there are 37 numbers on the board (0-36). Therefore, the casino will give you odds of 35 to 1.

When you win, you win 35x your bet back plus the amount you bet. A $1 bet would return $36 giving you a $35 profit. The house edge here is 2.7%, and the RTP is 97.3%.

If you are betting on odds/even, red/black, or high/low and the ball lands on 0, you don’t win. In this case the mathematical equation is 2 x 18 ÷ 37 = 0.973 = 97.3% RTP. 100% minus 97.3% makes the house edge of 2.5%.

This is reasonably fair as if you were given odds of 37 to 1, then the casino would not make any money from the game.

The game of roulette also depends on the version you are playing. American Roulette has a ‘0’ and a ‘00’, which adds an additional number to the table, thus reducing the player odds of winning. In this case the mathematical equation is 2 x 18 ÷ 38 = 0.947 = 94.7% RTP. 100% minus 94.7% makes the house edge of 5.3%.

European Roulette only has ‘0’; therefore, the player stands a slightly better chance of winning.

Slot Machine RTP/House Edge Determined

The same applies to how slots are designed. Cleverly, each reel on the slot machine is designed with a set number of symbols. The ratio of those symbols matching up versus the odds are calculated in the casino’s favor. In the case of slots, this is known as RTP (Return to Player). Most slots pay between 94% and 89% RTP.

You can imagine blackjack, baccarat, keno, craps, and poker games are all designed with the same principles, which ultimately is to make sure that the winning ratio versus payout work to the casino’s advantage.

See the 30 best paying online slots here

Blackjack House Edge/RTP Determined

Blackjack’s odds can change because the rules to how blackjack is played are diverse. For the most part, the house edge is only 0.5%, which as mentioned already at the beginning of this guide, this means the RTP is for the play is 99.5%.

Here are just a few examples of how you can expect the game’s odds to change slightly:

• Dealer hits on 17
• Dealer stands on 17
• 1 Decks
• 2 Decks
• 3 Decks
• 4 Decks to 8 Decks
• Bonus Side Bets
• Rules that apply to splits
• Rules that apply to double downs

Blackjacks Bonus Side Bets

Now right off the cuff, we will speak about the bonus side bets. They are always heavily weighted in the casino’s favor. More so than the odds of just playing the game itself. If you want to play Blackjack and maximize your winning potential, then avoid side bets.

Using the Basic Strategy

Now even though blackjack boasts a house edge of only 0.5%, making it look quite attractive, this percentage can only be achieved if you play the game using basic strategy. This is a set of mathematical rules you will need to follow that determine how you will act according to the dealer’s face-up card and the cards you were dealt.

Basic strategy effectively answers the question of whether you should hit, stand, double down, split, and so on using the proven mathematical probability that increases your chances of winning. Of course, variation plays its part here.

Pay-out Percentages of Games Versus Betting Systems

As a person playing games of chance, it is important that you understand that the RTP or House Edge displayed is per game you play.

Blackjack’s 0.5% house edge is per hand. Roulette’s is 2.7% house edge on a straight bet is per spin of the wheel. As a result, the house edge does not necessarily mean that this is the amount the casino wins over an entire session even though you could translate it that way.

With a poor betting system (someone not playing basic strategy at blackjack, for instance), the house edge is considerably increased; thus, the player’s RTP reduced. Not using common sense, or spotting opportunities will also negatively affect a player’s RTP.

Betting systems are there for a reason, and that is to stop the mistakes made by people that have little understanding or a lack of belief that there are ways to play games of chance and increase your chances of winning.

At the very least, if you use a betting system, you are playing the house edge instead of increasing it.

Betting Systems Counter Variance Per Game

In effect, you would not be wrong to think in this way, but there is one influence on each game’s house edge RTP that you need to consider. That is, of course, variance, which we have mentioned quite a few times. This is where betting systems are introduced – to counter the variance.

Smart players that reduce their losses and increase their chances of winning will differentiate between the RTP per deal, the dice roll, or the spin of the wheel versus their betting system.

Let’s put this in another way:

1. Your RTP or House Edge is per game played versus the house
2. Your betting system is used to take variance into consideration over an entire betting session

What do players that use betting systems take into consideration?

Some players choose games that they already know to have a low house edge, while others play the game, they enjoy playing the most and apply a system to that game. It is down to the type of person/player you are.

Other than these two factors, here is what you need to take into consideration:

• The game’s capacity for variance shifts/swings
• Bet sizing strategies
• Knowing when to quit

A Very Important Point to Learn About Bet Sizing Systems

Bet sizing will play an important part in any game of chance. Now, if you use a betting system to reduce to the house edge, you are effectively relying on variance to swing in your favor. This is known as upswings and downswings.

If you bet 10 times at $10 a bet and lost those bets, you have lost $100. Then, you bet $5 and win the next 10 bets, and you have won $50. You won 50% of hands, but your bet sizing let you down.

In any system you use, bet sizing will always become an important strategy.

Bet sizing using your experience and common sense 

Most of the time, bet sizing will come with an experience like when playing slots. Players get a feeling that the slot is paying out, so naturally, bet sizes are increased. However, when beginning the slot session, you will have no gauge on whether it is likely to payout. Therefore, you should start with small bets.

Bet sizing using your common sense 

You rock up to a roulette table and see the history board shows black numbers have rolled onto the wheel the last 6 times. Normally you would only bet $10 a time. Instead, you bet $20 on red. If red doesn’t come in, you bet $40 and so on because laws of probability say red is coming, and variance has played its part to help you.

Bet Sizing Built into a Strategy

In other cases, the bet sizing is built into a system. Most blackjack players using basic strategy will stay at the same limit table all night. This is because even if the player hits an upswing, moving to a higher limit table could see that hot streak blow cold. On the other hand, some systems will encourage the blackjack player to move to a higher limit table while on a winning run.

Some systems have set betting patterns in which the amount of the bet is increased or decreased incrementally according to a loss a or win. If you would like to know more about these systems, then search for the Martingale, Fibonacci, and Labouchere roulette systems.

You can also read more about Blackjack card counting. Bets were increased according to the ‘True Count’ of the deck. However, card counting is virtually redundant now because casinos shuffle the blackjack decks, and online casinos use RNGs, so it is virtually impossible to card count nowadays.

The Optimal Betting Systems

Now we must distinguish between what is a realistic optimal betting system and unrealistic one. Unfortunately, unless you can find a blackjack table where the dealers do not shuffle the decks, this system is now unrealistic.

There are other tactics such as card patterns or designs in games such as Punto Blanco that can be taken advantage of, but again, if you are caught, be prepared to lose your money and be booted out of the casino.

Therefore, there are two main optimal betting systems:

1. Strategies that increase your RTP above 100%
2. Strategies that reduce the amount you will eventually lose

The first one is likely to get you in trouble. The second one replies on your discipline – meaning how well you can stick to the system, and how well in tune you are with increasing and decreasing your bet sizing when you know you are on a hot or cold streak otherwise know as an upswing or downswing.

In Blackjack Card Counting Was the Ideal System

As we just finished the previous section off mentioning card counting, let’s start with this as the perfect example of an optimal betting system. It was won that took the RTP from 99.5% to over 102%. This is because the dealers did not need to shuffle decks back in the day card counting was rife.

Obviously, in this case, the ideal betting system is one that sways the edge in favor of the player without necessarily cheating. It is important to remember that card counting was only deemed as cheating because players colluded, and this is how the casinos were able to eject these people from their establishments. Loan card counters were just ejected because the casino made a rule up that it was not allowed.

There were no legal implications for the card counters simply because these people were not cheating and rather using a clever mathematical system that took advantage of the flaws of blackjack, which was the fact that the cards were not shuffled. When the deck was full of high cards, the players would increase their bet sizing.

Now casinos eventually managed to stop card counting by getting dealers to shuffle the decks regularly. This meant a ‘True Count’ could not be kept. (If you want to know more about the ‘True Count’, then read up on card counting).

In Black Basic Mathematical Strategy Is Still an Optimal Strategy

Yet, card counting would not have succeeded if players did not play what is called basic strategy. At the very least, players needed to play their hand according to a mathematical probability that would mean they are actually playing to the house edge. If you don’t know the basic strategy in blackjack, then you are in fact, increasing the house edge, sometimes up to 50%.

Basic strategy is an optimal strategy simply because it uses maths. Despite the fact that the chances are that you will win back 99.5% of your money per session, variation will see that you will often win on some occasions, often lose on others and break-even during other sessions.

Add these sessions together over a period of time, and the fact you have been playing basic strategy, you could have bet $10,000 and won back $9,950. It means you got a hell of a lot playing time in (depending on your bet sizing), and you lost the minimum amount you could use. Perfect!

It could be made even better if you decide to increase your stakes because suddenly you have started winning after a long losing streak, but this is a system you take at your own risk.

Betting Only What You Can Afford (Bankroll Management)

A system in which you understand how much time you would like to spend playing, the RTP or house edge of the game, and how much you can afford to lose is always going to be a winning formula. If you are on a downswing and start losing quickly at the start of the week, then the sensible system to use is not to increase your bets but reduce them.

You often see many gamblers increasing their bets. This is just stupidity. If my luck is down, I will increase my bets because surely my luck will come in soon.

In fact, the best systems encourage the opposite:

1. Bet low until you start winning big then increase your bets
2. Reduce your bet sizes when you are continuously losing

This way, you get longer playing at the table or on the slot and more time to get through your bad variance using low bets before you can bet high when your variance is good. For this very reason, you also need to know about variance versus velocity. This will help you manage your bankroll and your bet sizing.

Variance Versus Velocity in Games of Chance

There are generally two ways to measure velocity, although some people use three.

1. High-Velocity Games
2. Low-Velocity Games
3. Mid-Velocity Games

Bet sizing is important in all these games. As we explained in the section above ‘What Is Variance?’, you will have upswings and downswings in every game. We used the example of playing a game of ‘heads’ or ‘tails’ by flipping a coin the variance will defy probability. The coin will not always land ‘heads’ and then ‘tails’, but eventually probability will take its toll and bring the results level again.

Now as the odds are 50/50, heads or tails is mid velocity game. That should hopefully give you your bearings on this section.

High-Velocity Games and Variance

Now take the RTP of a high velocity that is 98% and add variance to the RTP. Let’s say it is a slot. The slot may have a 98% RTP, but because it is a high-velocity slot the way it has been designed is that you win big in its bonus rounds, but not much from lining up combinations on the reels. And, the bonus round is quite hard to come by – not impossible, but rare!

Ideally, you would bet $10,000 over a month period and at the end of every month walk away with $9,800 at the very least because the RTP is 98%. However, variance plays its part affecting probability with up and downswings.

Here is a scenario to describe just that:

In this scenario, you bet the same amount every spin on the slot. Now this purely an example, and obviously we have manipulated the numbers to fit into our 3-month scenario.

Month 1: You may play the slot for several sessions and eventually you have wagered $10,000 and have none of it left.

Month 2: The next month you play, and you staked $10,000, but you now have $14,600. A $4,600 profit.

Month 3: The next month you play, and you stake $10,000, and you have $14,800. A $4,800 profit.

The mathematics behind this is (100 ÷ $30,000 X $29,400) = 98% RTP

You have recuperated $9,400 of your losses from month 1 over month 2 and 3 in this scenario. Overall you wagered $30,000 in 2 months, you have $29,400. That is a 98% RTP on a high-velocity slot. A big downswing, then a sudden couple of upswings. What you can see though, is that it takes a long time to recuperate losses on high-velocity slots, but you lose your cash very quickly if the variance is against you as it was in month 1.

Many people would have thrown the towel in at this point, but those that understand velocity and variance will continue to play at the same stake until probability works back in their favor as explained with the ‘heads’ and ‘tails’ example above.

What would affect this scenario?

1. You could just as easily swap these months around and make month 1 month 3. Then you win big in month 1 and 2 but lose it all in month 3. This is the nature of high-velocity games and variance.
2. We mentioned the player in our scenario bet exactly the same amount every spin.

Low-Velocity Games and Variance

Low-velocity games are the opposite because you tend to win back your money quite often, and so you can afford to bet high because your bankroll is not at risk of being depleted as quickly as a high-velocity game would.

As we have already explained in detail how high-velocity slots work, it should not take too much to figure out that.

Basically, if you play Blackjack using basic strategy, you are playing a low-velocity game. Very rarely, will you lose a hand?

• 3% of hands will be won
• 48% will be lost or a push
• 7% hands other scenarios (Splits mainly)

What is the probability of losing 5 hands in a row?

Well, the string of mathematics behind this would be as follows:

0.48 ^ 5 = 0.012 = 4.0%

There is a 4% chance of you losing 4 hands in a row. Here is a table of odds for you to refer to in Blackjack if you play basic strategy.

As in Blackjack, when you win, you win your bet plus an amount equivalent to your bet back. The chances of you losing 3 or 4 hands in a row on a $5 stakes table and going down $20 are just 7.7%. Very rarely will it happen? Most of the time, you will win one, then lose one, win three, lose three, and so on.

If you happen to lose 9 hands in a row on the very unlucky percentage of a 0.31% chance, then you are on a downswing. Wait until you win your first hand after a losing streak before you increase your bet.

Over 9 hands on a losing streak at $5 per bet, you would still lose only $45. Plus, this scenario is unlikely, and with the variance being taken into consideration, eventually, you will swing back, recuperating a large portion of your losses.

Did You Spot How Variance Influences the RTP of A Game?

Hopefully, you have figured out how variance affects the RTP or house edge of any game. Just as a refresher, let’s have another look.

Probability is the ratio or chance of a result. For example, you have a 1 to 37 chance of landing the number you choose on a Roulette a board if you pick a single number. That means the probability of this happening is one time out of every 37.

However, you can go 50 coups (spins) in Roulette, and still, the number 35 doesn’t turn up. This is because the probability isn’t set in stone. Maybe 35 came up twice the last 50 coups. There is no real pattern that says probability will 100% work. Variance will always play a role.

Your RTP is how much your money will win, and not how many times you will win. For example, you might play a slot that has a 96% RTP but bet $100 and only win back $50 in 100 spins or bet $100 and wins $150. However, if you play for a long period of time, the 98% RTP should eventually stand.

For some players, this could take years or decades. You hear of people that play in casinos, and every game they touch their bankroll turns to gold. These people generally are just very lucky and have variance in their favor. Years later, you hear they are flat broke. It is because variance came back at them. Well, most of the time anyway – sometimes they just feel invincible and bet too much, but hopefully, you get the picture.

CONCLUSION

RTP is not set in stone, but if you play games of chance and understand how variance, probability, velocity, and RTP/house edge works, and you have a strategy in place (like blackjack’s basic strategy, good bankroll management, and bet sizing) to make sure in the long run you limit your losses, then who knows, you could become a winner.

Let’s list all those concepts:

• Variance
• Probability
• Velocity
• RTP/house edge
• Using a strategy
• Bankroll management
• Bet sizing

Many of them, when playing online slots, play the high RTP slots, and the progressive games. The RTP for progressive slots may not exactly be in a player’s favor because it has to make up for the progressive jackpot payout. Still, the way these pro gamblers use the above concepts to keep on playing is the reason why so many of them do eventually hit those progressive jackpots that are sometimes life-changing amounts.

See also Casino Games: Learn About Payout Ratio (RTP)