Why Expected Loss is Meaningless

Published: November 4, 2013

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The term "expected loss" is one that online gamblers come across once they start to get a little more serious about their wagering activities. Sometimes it can be confusing for some online casino players because the words chosen imply that as an online gambler there is a certain loss you should expect. Today, we will talk about what "expected loss" means, how it affects online casino players, and how you can easily calculate it and understand what it means in terms of profit and gaming.

First off, let us be clear that "expected loss" does not mean the money you should expect to lose whenever you play online casino games. The term "expected loss" represents the mathematical average loss that online casino games can cause in relation to the house edge and payout percentages tied to it. Some people believe that calling it an expected loss creates negative connotations in the gambler's mind, and that it should be called average loss; however, is is just a statistical matter of terminology and as long as you understand what it implies you should not worry about it too much, so let's get into the explanation.

Let's say that for a certain slot machine the house edge is 2 percent. Remember that the house edge is the casino's average profit per bet, and it is different for all games and it varies at different onlne casinos. If you are betting $5 per spin on this slot machine, then your expected loss per spin will be $5 x 0.02= 0.1 = 10 cents. However, at the exact time you spin the reels you know you will not lose exactly 10 cents because you could trigger any combination and win huge prizes, or you could lose your entire wager.

The point is that the expected loss tells you the mathematical average loss you would incur on each bet if you kept playing the game forever. If you were to play an infinite amount of spins your real losses would be close to the value of the average loss, but since this is impossible the average loss is just a number to keep in mind so that you are aware of the potential risk involved in playing the game. Online casino games are mainly influenced by chance, and even though we can use mathematics to predict the long term behavior of the machines, we cannot accurately predict what luck will bring you at any random moment.


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