Casino strategy 101: What is variance and what is its impact?
To be able to know why moves don’t always work, you first need to understand casino variance, how it impacts your results and why it matters.
Wikipedia defines variance as 'the expectation of the squared deviation of a random variable from its mean'.
To play online casino games, you don’t have to be an expert mathematician. But if you don’t understand the concept of variance, you’ll never know why the right moves can go wrong.
In simple terms, variance refers to the swings of good and bad luck you’ll experience in the casino world. Anyone that’s ever played online will have gone through ups and downs, but why do they happen?
To understand variance, you first need to understand the concept of expectation.
Every event has a predetermined expectation. For example, when you flip a coin it’s a 50/50 proposition. So if you bet on heads, your expectation of being correct is 50%.
The same idea can be applied to moves you make in playing online casino games. When you have 13 against an eight at the blackjack table, there is a certain win/loss expectation for hitting and standing.
Using expectation to guide your casino play
The notion of expectation is what skilled players use to make better decisions.
By doing some calculations, it’s possible to determine whether it’s better to hit or stand 13 against the dealer’s eight. But what’s important to note is that there are very few scenarios where a move’s expectation is 100% in either direction.
It’s this fact that gives rise to variance.
Continuing our blackjack example, a standard strategy chart says that you should hit 13 against the dealer’s eight. In other words, the chances of winning are better if you hit rather than stand.
So because you’re always looking to make positive expectation moves, you would hit. However, the chances of winning when you hit aren’t 100% and because of this, you can make the correct move and still lose.
Luck is variance in disguise
Most people would refer to the above scenario as getting unlucky. In reality, it’s variance. The reason it’s important to understand variance is because you shouldn’t let it change the way you play.
Use the example of playing baccarat.
In this game, betting on the banker is the positive expectation play, but there will be times when it loses.
In fact, given the dynamic of the game, it will lose around 50% of the time. But, if you trust in the numbers, betting on the banker will show a better return in the long-run than betting on the player hand.
When you’ve made the 'correct' move 11 times and haven’t won a single hand, the natural tendency is to change your strategy.
But this is a mistake. Variance is a concept based on infinity, which means things have to play out over time. In the short-term, the mathematically correct move might lose.
This doesn’t make it wrong, it just means that the results are varying away from the expected norm (result).
Eventually things will even out and the results will converge around the expected outcome. As technical as that sounds, it simply means that you should stick the 'correct' bets regardless of any short-term results.
Learn to embrace variance
The thing about online casino gaming is that you can offset negative variance (bad luck).
For now, it’s important to understand the concept and how it applies to casino games. If you can do that, you should find it easier to keep your emotions in check when the right moves are going wrong.