Variance

In the gambling world you will hear the words “Variance” and “Volatility” quite a lot. These tend to apply to games where the house has a considerably edge, but there are also used in tournament poker. They are two separate things, and understanding both of them and what they mean is crucial to your success as a gambler.

What is Variance?

Used primarily in sports betting and poker, but common elsewhere as well, variance applies to the spread between one set of numbers and the mean average. “Low Variance” implies that something has a short spread, or a short distance between two numbers, whereas “High Variance” implies the opposite.

In a coin flip, the variance will be low, as there are a low number of outcomes, but in a horse race of 20 runners, the variance will be high. When the variance is high for you, it means that the variance is low for the casino or the house, but when the variance is low for you, such as in the case of a 50/50 bet, it may mean that the variance is also low for the house. After all, the house needs to have the edge at all times.

To use variance as a gambler you need to study the outcomes and the possibilities of each bet, working out what your chances are of landing any specific bet, and whether it is therefore worth the risk. The best poker players do this before every major hand and they also work out something known as Equity, which is essentially the return they will get. As an example, if the variance is low but you only stand to win a very small amount whilst risking a big amount, it might not be a worthwhile risk to take. If, however, the variance is high, the risk is minimal and the reward is big, then it’s a worthwhile bet.

For instance, let’s assume you have a 5% or 1 in 20, chance of landing the next card and getting the best hand. Your odds are slim, but there is $5,000 in the pot and you only need to contribute an extra $10 to make the bet. No professional player will reject such odds. However, if they have a 50% chance of landing, but there is only $50 in the pot and they need to add a further $100 to bet, it makes more sense to fold.

Volatility

Like variance, low volatility equates to a high chance, whilst high volatility equals a lower chance. There are differences here though. In low volatility slots you can expect frequent wins, but as all slots tend to pay out similar amounts over the long haul, these wins tend to be very small. High volatility slots, on the other hand, will present with repeat losses, and with infrequent big wins.

There is no easy way to determine which games have low volatility and which ones have high volatility, as the developers tend not to release this information. However, you will figure it out for yourself after spending some time on the slot, and you can also read a review to learn from someone else’s experience.