Gambling 101

Why gamble?

If you gamble right, it's cheap entertainment. If you do it wrong, like 99.9% of people, it's expensive and ultimately not very entertaining. Really, who thinks that losing their hard-earned money is a way to have a good time? So since you're reading this site, let me try to talk you out of gambling blindly.

Your first choice is not to gamble at all. Believe it or not, thousands of people come to Vegas every year for the sights, the sounds, the shows, the food, and don't gamble at all. I know because I run into plenty of them. And by not gambling, they have more money to spend on all their other entertainment. Some readers have asked me if there's something wrong with them because they see all this gambling around them but they have no desire to do so themselves. Absolutely not! If it doesn't interest you, then don't feel pressured to do so just because everyone else is doing it. Heck, maybe you're the kind of person who would end up with a compulsive gambling addiction once you started? In that case, it's better off not to start.

But let's say you want to do some gambling. That's understandable, because most people do. So if you're intent on gambling, then at least make sure you have a strategy to limit your losses. Let's start exploring that.

Gambling as entertainment

When practiced responsibly, gambling is just as valid as any other form of entertainment. And in many cases, it can be cheaper. The expected loss from playing blackjack, craps, roulette, or baccarat at $5 per round with proper strategy is no more than $8 per hour. That's certainly cheaper than any Vegas show, or even most movies. As long as the amount you're risking isn't more than you could reasonably spend on any other form of entertainment, then you can consider gambling to be entertainment as well.

How can you gamble and lose so little? Just follow these steps:

• Play the games with the best odds (blackjack, craps, baccarat, video poker).
• Play the proper strategy for those games.
• Avoid the bad games (everything else, but especially slot machines).
• Bet small, and play slowly.

Of course, it's still possible to lose more than you expect. If you flip a coin 10 times then you expect 5 heads but you might get only 4, or 3, or 1... or even none. If you could predict your results exactly then gambling wouldn't be any fun. It's the unpredictable nature that makes it interesting.

Further down we'll cover some of those bullet points I just gave you, but first let's look at the two keys to responsible gambling:

1. Never bet more than you can afford to lose.
2. Have an understanding about how much you're likely to lose.

If you do those things, you'll be in way better shape than most.

How much money should I gamble?

The most important thing with gambling is to decide beforehand how much you're willing to lose. Don't plan on having any money left over when you're done, because you can't guarantee that you will. Set a strict budget for how much you can afford to lose, and take that to the casino. If you lose it all then stop playing.

Once you know how much you're willing to risk, you can use our separate article to figure how much to bet per hand or per spin.

How are the odds stacked against you?

The house has the edge in all games of chance. They don't make their money by getting lucky, they make money because the odds are stacked in their favor. However, the odds aren't drastically in their favor. You do have a chance of winning. You'd have to, otherwise no one would play. If everyone lost every time they played, no one would come back to the casino. But if 40% of customers win, they'll definitely be back. And for the 60% who lost, they were probably ahead at some point, which underscores to them that winning is possible, which will encourage them to return to try again.

Let's take roulette. If you bet $5 on red, you can win another $5. What are your chances of doing so? There are 18 red slots, 18 black slots, and 2 green slots, for 38 slots total. So you have an 18/38 chance of winning, or 47.4%. Of course, the flip side is that you have a 52.6% chance of losing.

The difference between these two numbers is the house edge, which is the average casino profit per bet. 52.6% - 47.4% = 5.2%. That means you'll lose an average of 5.2% of every bet you make on roulette. A $5 bet loses $0.26 on average. You don't lose that amount from a single wager -- on one round you either win or lose $5. But in the long run, your average loss will be 5.2% of the total amount bet.

Each game has its own house edge. As it turns out the house edge in roulette is pretty high. Most table games have a lower house edge. Craps and baccarat have an edge of less than 1.5% if you make the best bets, and blackjack is around 0.5% if you use the proper strategy. The worst game is slots, with an edge of around 5 to 13%, depending on the denomination and the casino's preference. This is compounded by the fact that slots are played much faster than table games. Clearly, to lose the least amount of money, you should choose the best games, bet small, and play slowly. My crash course in table games will help you do just that.

Best games and strategy

Here are the games with the best and worst odds:

Best odds Craps Blackjack Baccarat Video Poker

Worst odds Slot machines Roulette Big Six wheel Pretty much any game not listed under "best odds"

But even you play the best games, you still have to know the proper strategy. If you play craps but make the sucker bets, or make lots of bets at once, you might as well be playing a slot machine. And with blackjack, you need to know whether to hit, stand, split, or double down on each hand. (You can see my blackjack strategy table, or buy a similar one in the gift shop of any casino hotel for $1.50.)

The difference between playing smart and playing on a whim is staggering. Play craps, blackjack, or baccarat for $5/hand with proper strategy and you'll lose only around $8/hr. on average. On a $0.25 slot machine you'll lose $36 -- and have a much lower chance of winning overall. Heck, even a nickel slot machine loses twice as much per hour as one of the $5 table games I recommend.

Moral of the story: If you're going to play, then pick the right games, and learn the proper strategy (available on this site). Don't put a dime on the table until you know what you're doing.

Betting Systems

A betting system is a specific plan of betting more or less depending on prior wins or losses, to increase your chances of winning in the short term. No betting system works in the long term, which is another way of saying that no betting system can overcome the house edge (the casino's built-in mathematical advantage on every game). The fact that you're more likely to win in the short term is balanced by the fact that when you do lose, you'll lose big -- bigger than if you hadn't used a betting system.

Here are two examples. The Martingale has you double your bet after a loss. Say you bet $5 and lose. Next time you bet $10. If you lose you bet $20. If you lose you bet $40. At the end of the sequence when you finally win, you'll show a $5 profit. The main problem with this system is that if you lose a bunch of bets in a row you won't be able to afford to make the next bet. The other problem is that even if you could, the casino will limit how much you can wager.

A less dangerous system is to increase your bet by 50% every time you win. Say you bet $8. If you win then you'll increase your bet by half that ($4), so next time you'll bet $12. If you win that then you'll add $6, so you'll bet $18. If you win that then you add $9 so you're betting $27. Whenever you lose you start over with $8. This is safer than the Martingale because you bet more when you're winning, not when you're losing.

Betting systems are fun, but they never tilt the odds in your favor. In fact they don't even decrease the odds. They do make it more likely that you'll win in the short term, with the tradeoff being that when you do lose, your loss will be large. For more, see my separate article on betting systems.

Gambler's Fallacy

If you're playing roulette and red has just come up ten times in a row, should you bet on red or black for the next spin? The answer is that it doesn't matter. Each result is equally likely. Past results do not influence future results. Many a gambler's downfall has been the mistaken belief that you can discern any kind of pattern in the results. It simply doesn't work that way. If it did, the casinos would not be standing. But in reality, the casinos are happy to encourage people's delusions by providing pads of paper for them to keep track of previous spins, and even have a marquee at the table which shows the results of the last several spins. The casinos have no fear in doing so because they know there's absolutely no benefit to you in having that information. This is not a gray area, this is not something that the experts disagree on: Every single professional mathematician on the planet will tell you the exact same thing, that each spin is absolutely random. For more, see my separate article on the gambler's fallacy.

How to take money to a casino

If you want to gamble $1000 or less, then just carry it. A money belt is a good idea. If it would devastate you to lose that sum to a pickpocket or other random mishap -- you shouldn't be gambling that amount anyway.

For larger amounts, you have two options:

• Get a cashier's check from the bank and bring it to the casino's cashier ("the cage").
• Apply for a line of credit at the casino.

For cashier's checks, be sure to fax a copy of the check to the cage at least a day before you arrive. You'll want to give them time to verify that it's good. If you arrive in the evening, they won't be able to verify the check with your bank until the bank opens in the morning. Note that if you're staying in the hotel, you can deposit that money at the cage so you don't have to carry it around with you all the time.

For a line of credit, call the casino and apply ahead of time. If approved, then when you sit down at the tables or the machines you can ask for a "marker", which is a draw on your line of credit. If you're in the red at the end of your trip (and you probably will be), the casino generally gives you 30 days to send them a check to settle up.

Using a debit card tied to your checking account in an ATM is okay, but your bank probably limits the amount you can withdraw per day to $500 to $1000, and the casino ATM will charge you at least $4 on top of what your bank charges you.

What you absolutely should not do is to get a cash advance on your credit card, whether with a live teller or with a machine. First off, they'll start charging you interest from the millisecond they give you the cash, and most credit cards charge 20% per month or more. And if you get the advance from one of the machines in the casino, they'll tack on a whopping fee of their own, a minimum of 2% of the total. Ouch.

How to buy chips

Just sit down at the table and lay your cash down. It has to be cash, they don't take credit cards at the table. If you have a line of credit as mentioned above, then you can ask for a marker, and they'll give you chips as a loan. You don't have to draw your full line of credit, of course. If you have $10k of credit, you can draw a $1k marker, for example.

The dealer handles cash, but if you're drawing a marker then you'll need to ask one of the people roaming around in suits to handle the marker for you.

After you've laid your cash down you might have to wait while the dealer finishes dealing the current hand. After that, she'll count out your money, and count out some chips, and slide them over to you. The denominations are $5 (red), $25 (green) $100 (black), $500 (purple), and $1000 (yellow). She may ask you "How do you want that?", meaning do you want all green chips, all red chips, or a mix?

When you're done playing you'll "color up", which is to turn your chips into higher denominations so you have less to carry. Just push your chips towards the dealer and say, "Color up, please." She'll change your chips and give you the larger versions so you have fewer to carry. If you're not going to gamble any more than take your chips to the cashier (the "cage") to cash them in. You can't cash your chips in at the table.

All the games use the same chips, except roulette. With roulette each player uses a different color, so it's easy to see who bet on what. You can buy roulette chips with regular chips or with cash.

Why do people gamble?

Studies show that men gamble more for the adrenaline rush, or to bolster their masculinity, while women gamble more to be part of an escapist fantasy, or to be sociable. (Journal of Gambling Studies, Electronic Journal of Gambling Issues, NZ Herald)

And of course, some people gamble because of a compulsive addiction that is not easy to control. The good news there is that it's definitely possible for individuals who gamble compulsively to stop. (Kansas City Star)

Is investing gambling?

It depends on how you define it. Yes, both gambling and investing means putting your capital at risk for the chance of getting more capital. (And I've certainly lost more money in the stock market than I ever have at the casino!) The reason we don't usually consider investing to be gambling is that with most forms of investing you'll probably win, while in the casino you'll probably lose. InvestorGuide has a good article about investing vs. gambling.