Guide to Gambling
You should be having fun with your Quatloosia! And few things
are more fun than going to a big casino. Especially if you are in a place
like Vegas, you've got the shows, you've got the glitz, you've got the great
restaurants . . . and, yes, you've got casinos -- lots of them.
This webpage isn't meant to bash casino gambling. What it
is meant to do is make sure that you understand casino gambling,
and most importantly the significance of "Odds", so that when you gamble
you will lose the least possible amount of money. If you don't understand
the Odds, you will lose all of your Quatloos in short order, so you might
as well send them to us as we won't lose them so quickly. If you do understand
the Odds, you should be able to visit a casino and have the best chances
So why is gambling on a scams and frauds website? Because
simply the odds of some casino games are so bad that they amount to scams,
and any many ways the casino "system" is a fraud on unwitting
bettors. This is not to say that somebody has their finger on the wheel
or the decks are stacked, but rather that the casinos have designed things
so that you are misled into wanting things that you really don't if you
think about it.
But even more importantly, through the study of gambling many
basic risk management concepts can be taught, and applied in practical,
easy-to-see situations. Many of the world's best derivatives traders are
also ardent gamblers (and usually card counters), who understand the odds
and seek to develop systems which give them the best odds against the House
-- the very same type of odds they seek against their competitors in the
So, if you are interested in gambling, you'll enjoy this section
not just for the hints, but for concepts of hedging and risk management
which you can carry over to your business.
Understanding the "Odds" and the House Advantage
The "Odds" are your mathematical chances of beating the casino.
Let's take roulette, for instance. In the average U.S. casino,
the roulette table has 38 pockets -- 1 through 36 on alternating red and
black pocket, and a "0" pocket and a "00" pocket.
If you place your money on "red", meaning that you believe
that the ball will land in a red pocket, then your odds are:
18 pockets are red -- if the ball lands in a red pocket you win;
18 pockets are black -- if the ball lands in a black pocket you lose;
2 pockets (0 and 00) are green -- if the ball lands in a green pocket
Thus, your odds are 18 red that you will win versus 18 black
+ 2 green that you will lose, or 18 to 20. However, the "House" (casino)
will only pay out at 1:1 if you win this bet. This means that the House
has a 2-in-38 advantage (the 0 and 00 green pockets), or in percentage terms
a House Advantage of 5.26%.
The Risk Cycle
The risk cycle is how many plays, spins, or rolls, etc., that
you can make, before the House Advantage over you increases by one betting
It is easier to illustrate this. Let's go back to our Roulette
example. If the House Advantage is 5.26%, this means that the House can
expect to gain a one-bet advantage over you every 19 rolls (1 divided by
.0526 = 19). So, if you are betting $10 per spin, then after 19 spins the
House can expect to be ahead of you by $10, after 38 spins by $20, after
57 spins by $30, and so forth and so on.
If you play Keno, the House Advantage is 25%, meaning that
the Risk Cycle for Keno is 4 games.
If you play Blackjack with the Basic Strategy, and keep the
House Advantage to 1%, the Risk Cycle is 100 hands (meaning that you can
play a long time before the House gets an advantage over you -- but
only if you play to minimize the House Advantage to 1% or less)..
The Single Most Important Thing You Will Ever
Know About Casino Gambling: The Concept of Risk Compounding
Now for the very important stuff . . .
All of the books on gambling will analyze in excruciating
detail the House Advantage, and go into various strategies designed to minimize
the House Advantage. What none of the books we have read have ever
discussed is what we will call "risk compounding".
"Risk Compounding" means that with every roll, your overall
chances of beating the House go down, because the House's long-term advantage
grows larger with every roll or play.
Let's go back to our Roulette example. On your first play
the House advantage is 5.26% against you beating the House. These odds will
not change, meaning that on any given spin your odds of beating the House
is 5.26%. This is not the "payout" you can expect to walk out of
the casino with over time, because the House's odds are risk compounded.
Now on each roll, your chances of winning that particular
spin will always be 5.26% -- that will never change. But let's look
at your odds of being "positive" versus the casino.
If the House's advantage over you is 5.26%, that means that
your odds of winning is 44.74% per spin (50%-5.26%=44.74%). It also means
that your expected "payout" should be 89.48% of the total amount
you bet (2 x 44.74%), i.e., if you bet 1,000 in 100 spins of 10 each, you
should expect a payout of $894.80 at the conclusion of all your spins.
We have already discussed that the Risk Cycle for Roulette
is 19 spins, meaning that after 19 spins you can expect to be behind 1 bet.
This is where Risk Compounding kicks in, because it determines the number
of spins that you must beat the odds to be able to walk away from
the table a winner -- or even just even.
Your chances of leaving the Roulette table a winner are determined
by calculating your Payout Percentage to the power of the Number of Wins
You Need to Get Ahead. Thus,
|Behind 1 Bet
|Behind 2 Bets
||89.48% x 89.48%
|Behind 3 Bets
|Behind 4 Bets
|Behind 5 Bets
What this means is that on your first spin you have a 89.48%
chance of walking away a winner. If you lose that spin, you have a 80.07%
chance of walking away even, but after getting down 3 bets only a 51.33% chance
of walking away a winner. If you are down four betting units, you have a small
6.94% chance of beating the House, and after you are down 5 bets you are toast
(statistically you can't win).Since the House's 5.26% advantage means that
it should win an "extra" over you ever 19 spins, this means that
by at least the 95th spin (19 x 5), the House knows you will be a loser.The
casinos know this math better than anyone, and the pit bosses can quickly
calculate based on the amounts you are betting, and the time you will pay,
almost exactly what your losses will be! As former casino executive
Barney Vinson wrote in his fascinating expose, the casinos
"know that they have the advantage over long-term play. A few short-term
wins never phase the casino bosses, because they know that the longer a
player stays at the tables, the greater the likelihood that the player will
"Exposure. That's what it is about. The few players who know how to
'hit and run' are not the casino's first choice. They like the players who
grind it out. Their term for this type of player is 'casino-oriented.' But
a more accurate term for them is 'loser.'
B. Vinson, Las Vegas: Behind the Tables, p. 126 (Gollehon Books,
There are several ways to calculate risk compounding, but
the result is the same: The more you play, the lower your cumulative odds
are of "beating" the House. In casino parlance, this is known as "letting
the odds wear down a bettor".
Short Term Odds vs. Long Term Odds
Keep in mind too that our discussion is of long term odds. In the
short term anything can happen, i.e., you could be down 4 bets in
Roulette (mathematically a sure thing loser), but put your money on red
and have red come up five times in a row (you're now a winner!). But this
just further bolsters our rule that you are better off making a couple of
bets in most games, and hoping that Lady Luck is with you on those bets,
because over the long haul you will get trounced.
Let's say you did put your money on red in Roulette, but it came up black
5 times in a row? That wasn't supposed to happen -- you were supposed to
win a little less than half the time weren't you, meaning that you have
at least one two spins . . .
The odds have a much different application to you than to the House. You
may sit down and play 50 hands of Blackjack in a session, and within those
50 hands anything could happen. You could get a hot streak and win 10 straight
hands, or you could get a cold streak and lose 10 straight hands, or you
could just be generally hot or cold within those 50 hands.
Because you are playing only 50 hands, you will be subject to swings within
those hands.The casino doesn't look at your 50 hands to calculate its odds
of having enough money to pay for all the electricity and the landscaping
it takes to run the place. Instead, the casino looks a all the hands IT
is playing during a day, maybe 50,000 hands of Blackjack! Over the course
of 50,000 hands, hot and cold streaks tend to even out, and the odds means
the casino pretty much knows that for so many thousand hands played, it
will walk away with so many dollars.
So, when you see discussions of odds, you must take this grain of salt:
The odds are really only relevant to the casino unless you play a lot of
hands, spins, or throws . . .
How the House Maximizes Its Advantage
The casinos all know and understand "risk compounding" and as has been
mentioned know that they the "odds" can "wear a gambler down over time."
This is why the whole casino system is set up not only to encourage you
to bet, but to make a bunch of small bets so that you have no chance of
beating the casino. What the casino doesn't like is a bettor who comes in
and makes a couple of bets, wins, and then leaves.
Here's a couple of the ways the casinos take advantage of risk compounding:
Table Maximums: Casinos rake in millions of dollars per day and
hundreds of millions and sometimes billions of dollars per year. So why
do they have table "maximums" of $500? Simply, to discourage large bettors
(known as "whales") from coming in and making a few big bets which could
detract from the casino's bottom line, and then leaving without the casino
being able to wear down the bettor. While casinos will set up "high limit"
tables, these are usually restricted so that to get in these games you must
first enter yourself in the "comp system" (described below) which like a
bad community theatre play, everybody wants to get into but then they are
miserable while they are there.
Table Minimums: These perform two functions: First, to drive away
the "grinders" who would play with quarters if they could. Second, but more
importantly, to psychologically encourage people to bet at or near the "minimums"
making lots of smaller rolls which give the casino a much better chance
of making money than if the gamble just made a couple of big rolls and left.
The Comp System
Very simply, the "Comp System" is set up to give gamblers who put up a
minimum amount of money "at risk" for a certain period of time, certain
"complimentary privileges" starting at the low end with free trips to the
buffet to at the high end stays in hundred-thousand-dollar-per-night suites
and LearJet shuttles to and from the casinos.
Most people who visit the casinos desperately want to get "comp'd" and
enjoy the casino privileges free of charge. This is a boondoggle. As show,
the longer you play the lower your odds. The casinos have long since calculated
how long you need to gamble before there is no chance of you "beating" the
House and you will suffer big losses. So what you are doing is essentially
sacrificing your chance to beat the casino for a free buffet or a stay in
a suite (so you can gamble so more later, further reducing your odds and
the casinos payouts).
If you see a person who is in the casino just for the "Comp" system, you
can go and offer to tattoo "sucker" on their forehead, because that's what
they are. They would be well ahead to just pay for the damn buffet and luxury
suite themselves out of their own pocket, and then take on the casino with
one or two big rolls with much better odds. Playing for long periods of
time with large amounts of money is mucho stupido because of the
House Advantage, but that's exactly what the comp system is designed to
get you to do.
Does this mean that you should stay out of the casino's Comp program? No.
You should just look at Comps as a bandage that the casino gives you after
you lose, and very small part of your overall return (OK, the buffet
got you $15 bucks back), but NOT as a reason for gambling in the first place.
People who gamble FOR Comps are stupid.
Quatloosia! Rule of Gambling
So what does all of this mean? We're talking about the whole
design of the casino system to get you to the tables and keep you there
as long as possible. It means, very simply:
Your best chance of "beating" the House is on your first
Your odds of "beating" the House go down with multiple
With multiple plays, your odds of "beating" the House
will eventually go to zero.
Leading to the Quatloos! Rule of Gambling: With almost all casino games,
you have better overall odds making one big bet than making a bunch of smaller
bets. But if you want to play for a long time, stick to the games which
give limit the House advantage to around 1%.
Note that this is not saying that the odds change. If you bet $1,000 all
at once the House only has a 5.26% advantage over you, and if you bet the
$1,000 over 100 bets at $10 each, on each $10 bet the House advantage is
still just 5.26% on each roll. The difference is that by betting the $1,000
on one roll, you actually have a chance of winning that roll and coming
out ahead of the House. By betting 100 times at $10 each, the casino mathematically
expects that you will be "down" by at least 5 bets (100 divided
by 19 = 5), and being down 5 bets mathematically means that you have very
low odds of eventually fighting back and beating the House.
Where does this rule not apply? You don't have to worry about this rule
too much, or about risk compounding so long as you stick to games which
-- if played correctly -- can bring the House advantage to within 1%, essentially
a statistical "dead heat" with the House, meaning that the House
can only expect its advantage to appear after 99 bets (a lot of playing
time). But see above warning Short-Term Odds vs. Long-Term Odds.
So, if we can't avoid the temptation, lets just make a bet or two on the
terrible games, and lets instead spend our time enjoying only the very best
odds games where the House advantage is 1% or less.
Beating the Odds (Or At Least Keeping Them Within
What the casinos are dreadfully afraid of are systems that have
the effect of giving the bettor an edge, no matter how slight. The reason
for this is that risk compounding works both ways: If the bettor can get
even a slight edge, then with multiple rolls the bettor has no chance of
The best-known system for beating the odds is counting cards in Blackjack.
A good card counter can turn the tables on the odds so that he has an approximately
1.5% advantage over the House. Over 100 hands, this means that the bettor
has a risk compounded advantage of 6.5% over the house -- very significant,
and terrifying enough to the casinos that they will eject and Blacklist
any bettor whom they believe is card-counting.
But the truth is that humans are not perfect, and there is probably nobody
and no system that an play without making an occasionally error. So really,
what you end up doing is finding systems that will statistically allow you
to play "even" against the House over a long period of time, with the goal
being to have the most amount of fun while gambling with the least amount
Even Games (Sometimes Player Advantaged)
Games with which you can limit the House's statistical advantage
to less than 1.0% -- if and only if you are a very educated and astute
player -- include:
The truth is that probably less than 1/2 of 1% of the players
of these games play them well enough to come anywhere near this "statistical
dead heat" with the House. Unfortunately, many people think they are
good players without even knowing what it takes to play well enough to get
these odds. For those 99.5% of people who cannot play these games with near
perfection, the House advantages probably ranges from 2% to 5%. Novice and
really dumb players (such as those who play the "Field" in craps, or accept
insurance in Blackjack) can play with a House advantage probably approaching
that of Keno (the worst game in the casino).
Small House Edge Games
Games with which you can limit the House's statistical advantage
to at or slightly more than 1% include:
Only Pai Gow Poker requires skill, and you with this game
you will only get near the 1% mark if you are an expert with near-perfect
play. Despite its James Bond-ish glamour, Baccarat actually requires less
skill than about anything except the slots, and of course the slot machines
require absolutely no skill.
Sucker games, meaning games that will give the House such
a big advantage that you'd have to be a real sucker to play them, include:
Roulette (no matter what goofy combination of pockets suckers
come up with, mathematically they can never get the House advantage
lower than 2.63% in Europe, or 5.26% in the U.S.).
Caribbean Stud (worse than Roulette, since you can't get the
House advantage lower than 5.3%).
Casino War (with a 2.88% minimum House advantage, much better
than Carribbean Stud but still awful).
Keno (THE sucker game of all time, considering
that the lowest House advantage is 25%! -- worse than cumulative
odds of all the other casino games combined).
Let-It-Ride (Worse than Caribbean stud with a 3.5% minimum House
Slot Machines (The average House advantage is 7% which is somewhat
offset by the fact that it make take awhile to lose all of your money,
and if you play long enough you might get a free T-shirt or buffet which
takes the edge off your losses).
Wheel of Fortune (known as the "Big Six" because there are 6
horribly low-odds bets that suckers can -- and frequently do -- make).
Individual Games Examined
In the coming months we will be examining the intricacies
of the main casino games, such as Blackjack and Craps, and highlighting
some of the best gambling strategies, as well as the numerous sucker bets
(such as "Big 6 or Big 8" in Craps or taking insurance in Blackjack).
Other Quatloos! Casino Gambling Webpages
This is an off-beat topic for us, and we're curious about what
you think about our covering casino gambling. Please send us with your comments,
through our Tony-the-Wonder-Llama
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