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What is Volatility in Casino Gambling?

Posted on May 31, 2022 | 11:24 am
what_is_volatility_in_casino_gambling

In some ways, online gambling is among the most approachable of any activity there is.

Companies welcome new players with generous bonuses, offer tutorials and (sometimes) reliable customer service to make sure that newcomers are made to feel welcome. It’s a beautiful thing!

In other ways, though, it can take what feels like ages to feel at home in the world of online casinos!

In addition to the ins and outs of finding where and how to play, there is a whole vocabulary to learn!

Seemingly obvious words like “shoe,” “insurance,” and “prop” suddenly overflow with hidden meanings. And perhaps no such word is as ubiquitous or confusing as volatility.

It’s one of those terms that seems to pop up everywhere, is always understood as being of great importance, and never actually gets defined or explained!

It shows up in descriptions of the corporate philosophies and news of design firms, all kinds of strategic analysis, and even the titles of new slots!

But does anyone actually know what it means?

Fear not, reader. Let’s break it down!

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What is Volatility in Gambling?

what_is_volatility_in_gamblingIn normal life, volatility has two main meanings:

  1. liability to change rapidly and unpredictably, especially for the worse.
  2. tendency of a substance to evaporate at normal temperatures.

But as any seasoned player can testify, there’s nothing normal about the online gambling industry!

In the context of gaming (especially in slot play), volatility indicates how often a game pays out, as well as the size of its payouts. In some circles, it may also be referred to as “variance.”

A slot with low volatility will feature frequent wins… but those wins will be mostly small in size.

In contract, a slot with high volatility may take a very long time indeed to award wins… but when they finally do arrive, they are likely to be significant.

Of course, plenty of slots (as well as other kinds of games) come in right down the middle, with medium volatilityMedium-low and medium-high are also commonly seen.

As such, there’s really no “right” level of volatility. When played over the long term, the term is mathematically irrelevant to a player’s total take-home wins or losses. It’s simply a matter of player preference – some love the excitement of higher volatility, while others prefer the steadier dopamine hit of a low volatility’s more frequent payouts.

(It’s important to note that all indications of a title’s volatility reference the game’s long-term mathematical average. In the short term, anything can happen… including big payouts in low-volatility games, or frequent, smaller ones in high-volatility offerings. That’s the beauty of the game!)

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Volatility vs RTP

This is a great opportunity for players to learn more about another commonly misunderstood concept: the return to player ratio (also known as RTP).

Here’s the short version: volatility is how often a slot pays out, while RTP indicates how much a slot pays back to players.

When compared with volatility, RTP is a straightforward concept. Usually expressed as a percentage, it simply indicates how much of the total amount wagered players should mathematically expect to see returned to them. If a slot comes with an RTP of 96%, for example, it would be mathematically likely that for every $100 wagered, players would end up with $96. An RTP of 98.5% would mean a (mathematically likely) return of $98.50 on each $100 wagered. The higher the number, the better for the player.

When it comes to RTP, player preference is a total non-factor. Higher RTP is just objectively better for gamblers, while lower RTP is objectively worse.

(Note that, since the house always wins over time and would never tolerate a game at which they can’t expect to make a profit, there’s essentially no such thing as a game with an RTP of 100% or higher. The only way to beat the house is to quit while ahead!)

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Implications for Strategy

implications_for_strategyAs noted above, there is no long-term difference for players between high and low variance titles. Over the long haul, RTP is the difference-making factor, not volatility!

With that said, most gamblers don’t have the luxury of existing entirely in the long-term. Not only is there a limit to how many hours they can spend playing, there is also the potentially more disruptive issue of having a limited bankroll! A casino can stand to lose for hours, days, or even weeks at a time, so long as they know they retain the mathematical edge.

It’s different for individual gamblers. No matter how well-built their bankrolls might be, no gambler can stomach a losing streak forever.

As such, there is one absolutely essential strategic implication when it comes to volatility:

DO NOT UNDER ANY CIRCUMSTANCES play high-variance games without a sizable bankroll to ride out the swings!

Think about it.

If high variance titles regularly go for long stretches without paying off, but then tend to come with bigger eventual paydays, it is absolutely crucial for players who opt in to these titles to be able to play for long periods of time!

If you can’t stand to lose at least 100 rounds of betting in a row, then you can’t responsibly afford to play a high-volatility game. To ignore this rule is to risk throwing your whole bankroll away, only to miss out on the eventual payday headed your way.

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