Academy Contents
Variance and Volatility
Understanding how variance affects short-term results. Learn why even games with the same house edge can have very different risk profiles.
Key Formula
σ² = Σ P(x) × (x - μ)²What is Variance?
Variance measures how much actual results differ from the expected value. High variance games have bigger swings—you might win or lose large amounts quickly. Low variance games offer more predictable, gradual outcomes.
Key Points
- Variance measures result dispersion
- High variance = bigger swings
- Low variance = steady results
- Volatility is often used interchangeably with variance
Why Variance Matters
Two games can have the same house edge but very different variance. A low-edge, high-variance game might bankrupt you before the edge matters. A high-edge, low-variance game might let you play longer with the same bankroll.
Key Points
- Edge determines long-term loss
- Variance determines short-term swings
- Bankroll requirements differ by variance
- Risk of ruin increases with variance
Variance by Game Type
Different game types have inherently different variance characteristics based on their payout structures and win frequencies.
Key Points
- Baccarat: Low variance (frequent small wins/losses)
- Roulette (even money): Medium variance
- Slots: High variance (rare big wins)
- Keno: Extreme variance (very rare huge wins)
Managing Variance
Understanding variance helps you choose games that match your bankroll and risk tolerance. It also helps set realistic expectations about session outcomes.
Key Points
- Match variance to bankroll size
- High variance needs larger bankroll
- Expect bigger swings in high-variance games
- Lower stakes help manage high variance
Try It Yourself
Apply what you've learned with these interactive tools:
Continue Learning
Understanding the probability of losing your entire bankroll before achieving your goal. Critical for bankroll management.
Learn how expected value (EV) determines the long-term outcome of gambling decisions and why negative EV is unavoidable in casino games.
Understanding how computer simulations model gambling outcomes. Learn how Monte Carlo methods estimate probabilities and risks.
18+ Only. Gambling involves risk. Please gamble responsibly. Learn more →