A casino is a business like any other, like your local bowling alley or video arcade, and so it has to make money in order to keep its doors open. This makes real money games the driving force of the operations. The underlying principles for casino money generation are not in players’ deposits, but in wagering and playing, and they include the house edge, variance and return to player (RTP).
The house edge is the house advantage, and it is based around probability and mathematics. It is usually calculated, not against your money on the table, but the total bets. It is a rather simple concept.
If you take the example of European Roulette, there are 18 red numbers, 18 black numbers and one green zero. Betting on black has a payout of 1:1. So, if you bet $10 and win, you will get $20, which is your $10 stake and a $10 profit. However, considering that it’s not a 50/50 probability of winning, you have to be in luck and get a black number.
There are a total of 37 numbers and 19 of them are not black, which makes the odds of a black being spun 18/37. Therefore, with 37 possible outcomes in European Roulette, you could get 18 outcomes in your favor, bringing you +$180, while you could lose in 19 outcomes and have a net loss of -$190. This is a calculation with the $10 stake in mind and you can apply the concept in the calculation of expected outcome of American Roulette (single zero).
Expected outcome = winning probability – losing probability = 18/37-19/37 = -1/37 = 0.027 or -2.7%.
With a negative expected outcome, the player usually loses over time as the house has a 2.7% edge. You can use the house edge to figure out how much loss you may suffer, theoretically, by multiplying your total wager amount by the house edge.