Variance in gambling refers to the level of risk or reward you can expect from a game or bet. It helps players understand how often they can expect to win and how big those wins might be. Different games have different variance levels. For example, If a game has low variance, you win small amounts often. On the other hand, if it has high variance, you win big amounts, but not very often. Knowing the variance also helps you choose games that align with your risk tolerance and preferences. This is because high variance means higher risk, and low variance means lower risk. Therefore, whether you seek adrenaline-pumping highs or prefer steadier gameplay, variance plays a crucial role in shaping your gambling experience. However, it is essential to remember that this doesn’t change the house edge: The casino always has a slight advantage in the long run. To learn more about the variance in gambling, keep reading our article.
Types of Variance in Gambling
There are two main types of variance in gambling—low and high variance. Let’s look at both in details.
Low Variance
Low variance refers to games or bets where the outcomes are relatively consistent and predictable. It is like playing on a calm, predictable ocean, with the wins like gentle waves. This type of volatility has small frequent wins that add up over time. Additionally, you’ll have a smoother gambling experience since you are less likely to experience big losses that’ll affect your bankroll.
Therefore, if you have a small budget, it is better to opt for low-variance games such as video poker with more predictable outcomes.
High Variance
High variance in gambling refers to games or bets where the outcomes can vary widely, leading to infrequent but potentially large payouts. This is what keeps gamblers coming back for the thrill of a potential jackpot—it’s like riding a rollercoaster—exciting but potentially scary.
However, you won’t win as often compared to low-variance games. It might feel like you’re on a dry spell for a while. Similarly, Your bankroll will experience more dramatic swings. You could win big one minute and lose big the next. It’s a riskier ride.
The Differences Between Low and High Variance in Gambling
Medium Variance
Medium variance offers a balanced risk and reward in gambling. This means that the outcome of your bets or games is moderately predictable, with frequent small wins and occasional larger payouts. The risk level falls in the middle ground as well. You’ll experience some swings in your bankroll, but less dramatic than high-variance games.
Medium variance games are a good option for players who want a balance between excitement and risk without extreme swings in their bankroll. However, it is essential to understand even in medium variance games, the house edge still exists.
The Importance of Variance in Gambling
Understanding volatility helps you to;
- Manage your bankroll. High-volatility games require a larger bankroll to handle the ups and downs, while low-variance games require less money. This helps you set appropriate betting limits and avoid chasing losses in high-variance games.
- Make an informed game selection. Knowing the variance of a game allows you to choose one that aligns with your playing style and risk tolerance, for example, if you’re on a tight budget, a low-variance game with frequent small wins might be a better fit than a high-variance game with the potential for big jackpots but also longer dry spells.
- Emotional Control. Big losses in high-variance games can be frustrating, while a lucky win might tempt you to bet recklessly. Understanding variance helps you stay calm and make rational decisions based on strategy, not emotions.
- Set realistic expectations. You won’t win every time; even a good strategy won’t guarantee consistent wins. Understanding variance helps you avoid getting discouraged by losing streaks or feeling overconfident after a few wins.
What is the Variance on Slot Machines?
Variance in slot machines refers to the level of risk associated with playing a particular game. Slot machines don’t have a single, set variance. Each game is designed with a specific level of variance in mind, which typically falls into three categories:
- Low variance slots. These slots pay out smaller amounts more frequently. They are designed for players who want to stretch their bankroll and enjoy steadier gameplay.
- High variance slots. These slots offer the chance to win big jackpots, but those wins come along much less often. You might spin for a while without any wins and then hit a big bonus round.
- Medium variance slots. These slot machines provide a moderate risk, offering a mix of small and larger wins. They don’t surprise you unpleasantly during gameplay.
Is High Volatility Good or Bad Slot?
High volatility in slots isn’t inherently good or bad—it depends on your preferences and risk tolerance. Here’s a breakdown of the pros and cons to help you decide:
| The Pros of High Volatility Slots | The Cons of High Volatility Slots |
| They offer the chance to win massive jackpots | You might experience long stretches without any wins |
| They often come with higher payout multipliers and more lucrative bonus features, which can lead to larger wins when they do occur. | Lack of frequent wins can be discouraging |
| Suitable for players with a larger bankroll who enjoy the thrill of the chase | Players can quickly lose their bankroll if they are not careful. They can also be risky for players with a limited budget. |
| The Potential for big wins can be exhilarating | Provides a more emotionally volatile experience |
Slot Machines – The Perfect Case Study of High Variance
Slot machines are known to be one of the most unpredictable casino games due to their high levels of variance. Yet, they are one of the most popular (and addictive) forms of gambling because they offer a tantalizing possibility of winning a huge jackpot.
According to AP News, slot machines generated over $35 billion in 2023, compared to $10 billion from table games and almost $11 billion from sports betting. These figures attest to the popularity of such machines regardless of them having some of the highest variance in casino games.
Before you play high-variance slots, ensure you have a sufficient bankroll to withstand extreme fluctuations. This is because, in exchange for a thrilling gaming experience, you might also go through long dry spells or small, insignificant wins.
Your level of risk tolerance will also affect your game choice so, be ready to accept the accompanying volatility. Additionally, some slot machines offer free spins, multipliers, and other bonus features to increase your chances of winning big. These additions only increase the level of variance and can result in substantial wins, however infrequent.
Variance in Sports Betting
In sports betting, variance refers to the degree of uncertainty or risk attached to a particular bet or series of bets. It plays a significant role in determining the swings in results that bettors experience. We can compare it to the weather – you might predict sunshine (a win) based on the odds, but sometimes you get hit with a rain shower (a loss) due to random chance.
Just like in slot machines, there are high and low variances.
- High variance bets: These are like longshot bets on underdogs or risky parlays (combining multiple bets). They offer the potential for big payouts, but the chance of winning is lower. You might experience long stretches of losses before a big win.
- Low variance bets: These are like favoring the strong team (favorites) or point spread bets where you don’t need to predict the exact winner. They offer smaller but more frequent wins, leading to a steadier bankroll.
Remember, don’t allocate a huge portion of your bankroll to a single high-variance bet. Spread your bets out and adjust the amount based on the variance of each bet. Also, don’t chase losses after a string of bad bets. Stick to your strategy and remember variance will even out in the long run. Most importantly, even the best sports bettors face swings caused by variance. It’s an inherent part of sports betting.
How to Calculate Variance in Sports Betting
While variance isn’t directly calculated in sports betting, you can analyze betting results to understand how your wins and losses deviate from the expected outcome (average return based on odds). Here’s how you can approach this:
- Track your bets: Maintain a record of your bets, including the date of the bet, amount wagered, the odds you received and more.
- Calculate your Win Rate. This gives you a basic idea of how often your bets are successful. Divide the total number of winning bets by the total number of bets placed and multiply by 100% to express it as a percentage. Win Rate = (Number of Winning Bets / Total Number of Bets) x 100%
- Calculate Average Return per Bet: This shows your average profit or loss per bet. Add up all your net returns (winnings minus amount wagered) and divide by the total number of bets placed. Average Return per Bet = (Total Net Return) / (Total Number of Bets)
- For each bet, compute the difference between the actual profit or loss and the expected value. Then square this difference. Sum all the squared differences and then divide by the number of bets to get the variance.
Alternatively, you can opt for sportsbooks and apps with tools to help you analyze your betting history and visualize variance. These might include charts that show your win rate.
How Do You Reduce Variance in Betting?
While you can’t completely eliminate variance in betting, there are strategies you can employ to minimize its impact and create a more stable and predictable betting experience.
So, how do you reduce variance in betting
- Focus on Value Betting. This is the core principle. Look for bets where the implied probability (based on the odds offered) is higher than the actual probability of the event happening. Over time, this should lead to more wins, even with variance.
- Diversify your bets. Don’t put all your eggs in one basket. Spread your bets across different games, events, and even bet types (avoid parlays for lower variance). The advantage of using this strategy is that losses in one game can be balanced out by your winnings in another game. Our advice? Avoid betting your entire budget on high-variance games.
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- Manage Your Bankroll Carefully. Set a specific betting budget and stick to it. Allocate a small portion of your bankroll to each bet, especially for high-variance bets. This way, even a losing streak won’t wipe you out.
- Bet Smaller Percentages of Your Bankroll. Betting a smaller percentage of your bankroll (e.g., 1-2%) on each bet reduces the impact of any single loss.
- Choose Lower Variance Bets: If you’re risk-averse, focus on bets with a higher win probability and smaller payouts. Examples include betting on favorites in sports or slots with frequent small wins. This provides steadier results with less fluctuation. Additionally, you can also bet on markets with predictable outcomes like totals or points spread.
- Take advantage of bonuses and promotions. Use free bets, bonuses and promotions offered by sportsbooks to cushion your bankroll and reduce your financial risk.
- Utilize Betting Tools and Resources. Some sports betting websites and apps offer tools to analyze odds, track your bets, and identify potential value bets. These can help you make informed decisions and potentially reduce variance.
- Analyze and Adjust Strategies Regularly. Keep detailed records of your bets and analyze the results. Identify patterns or strategies that lead to high variance and adjust accordingly.
- Understand the House Edge. Remember, the casino or sportsbook always has a built-in edge. Variance might mask this edge in the short term, but it will prevail over time. Focus on making smart bets and managing your bankroll effectively, not overcoming the house edge.
To Wrap Up
As we have seen, variance is a key determinant of whether a game goes in your favor or you are left empty-handed. By understanding the role variance plays in gambling, you will be able to choose games that align with your budget, preferences, risk tolerance, and objectives.
Whether you enjoy the thrill of high stakes offered by high-variance games or the stability that low-variance options offer, the key is to monitor and carefully manage this aspect of the gaming industry. We hope this article helps you make informed decisions and successfully navigate variance’s highs and lows.
Disclaimer: This article is for informative purposes only and should not be construed or used as financial advice.
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