Understanding Expected Loss in Casino Games

If you're interested in playing online casino games for more than just recreational purposes and are doing your homework into understanding returns in online casino games and how to maximise your profitability at the casinos, then you've probably come across the term "Expected Loss" in more than a few articles on gambling mathematics.

The term "Expected Loss" is somewhat confusing to some who think that it refers to the amount that they can expect to lose whenever they play. The reality is that it refers to the mathematical average loss than you can expect to incur when playing online casino games over the long term. So it's definitely not what you will lose every time, but rather the average over the long run.

Calculating Expected Loss

While there are calculators available to assist you in determining the average loss of a given wager over time, if you prefer to do these calculations on your own, the following formula will need to be applied:

Wagers per hour x Amount Wagered x House Edge x Number of Hours = Expected Loss

To put this in terms of a working example, let's consider the calculation for use in online slots play, with 600 spins being the average amount for most players per hour:

600 spins per hour x $1.25 x 6% x 1 hour = $45

This tells us that the expected loss, or the mathematical average loss will be $45 per hour on 600 spins at $1.25 per spin. BUT this is not necessarily the amount that you should expect to lose per hour as a player!

Let's look at another example to illustrate why this is. In a game of roulette, the house edge is 5.26%, so we can say that the expected loss on a $10 bet is: $10 x 5.26% = $.053 (rounding up from 0.526).

But if you bet $10 in a game of roulette you won't lose exactly $0.53 because it's not possible. If you place an even money bet like Red or Black you'll either win an additional $10 or lose your entire $10 wager. So you can't expect to lose $0.53 - this is just the mathematical average. And the mathematical average usually works out over vast numbers of bets over the long term.

When your losses will equate to the average

As mentioned above, expected loss is the long term average. This means that if your expected loss for an hour of slots play is $45, you won't lose exactly $45 every time you play. If the results were so predictable no one would ever gamble! It would be too boring and unattractive to know you'll lose each time.

The chance of winning is what motivates us to play, and over the short term it is also highly possible. However the longer you play, the more the likelihood of losing increases. So the more you play for extended periods, the closer your losses will be to the expected or average losses discussed above. If you do the math you'll find that in the short term anything can happen and you may end up walking away with some generous profits, but over the long run, losses are pretty much a given.