A Quick and Easy Guide to Casino Volatility

A Quick and Easy Guide to Casino Volatility

Volatility is a term that you'll see used to describe certain bets or games in both online and land-based casinos. You'll typically see it in terms of a volatility being high, low or medium. This term is related to the term variance in statistics, and it basically has to do with how likely you are to see big swings. Unfortunately, it's not an idea that's very intuitive at first unless it's presented in a certain way, so what we want to do here is present this idea in a way that will help you to quickly understand it. We also want to show you how to use this information to have more effective levels of bankroll management.

Volatility in Simple Games

Let's play a simple game. We're going to flip a fair coin. If it's heads, then I give you $1, and if it's tails, then you give me $1. It's easy to see that this game will have a zero percent advantage for either player, but it's also easy to see that there shouldn't be any huge, crazy swings for either of us all that often. Now let's look at a different game that has the same percentage advantage.

This time instead of flipping a coin, we're going to roll a fair, six-sided die. If it comes up a one through five, then you pay me $1. However, if it comes up a six, then I'll pay you $5. This game has a zero percent advantage for both players, but what's important to note is that the variance is higher. It'll be easier for you to go on long, weird streaks with this game than with the coin-flipping game.

The lesson to understand here is that the house advantage of two bets can be the exact same when the variance is much different.

Payout Structure

Payout structures are the main thing that form the variance of a game. The more balanced the structure is with payouts at different levels, the lower the variance. On the other hand, the more unbalanced and top-heavy the structure, the higher the variance. This is seen as a bit of a tradeoff in a lot of popular games like online slots when there might be a huge jackpots advertised, especially a progressive, but the variance is extremely high as a result. In fact, almost all progressive jackpots have a high variance unless the rest of the payouts are extremely well-managed.

Influence on Bankroll Management

Bankroll management is essentially based on two numbers. The lower the house advantage, the more aggressive you can be with it, and the lower the variance of the game, the more aggressive you can be with it as well. We're going to look at two different types of players in a European roulette game as an example and see how their bankroll management guidelines should be different

Suppose you have a player at a European roulette table who is playing the straight-up bets for a wager only. This is the highest volatility bet on the table. This player should use a relatively low bet size for his bankroll.

Now suppose you have a player at the same table who is only playing even money bets like red and black. This is the lowest volatility bet on the table. Even though the house advantage is exactly the same as the other player listed above, this player can use larger bet sizes relative to his own bankroll.

If you use these guidelines and ideas in choosing your own bankroll management strategies, then you'll keep yourself in the game for longer without unnecessarily choosing bet sizes that are too big or too small.