When your online gambling gets a little more serious, you encounter the term „expected loss”. It can be very confusing because it implies that there is a loss that should be expected. But what does it actually mean?
It definitely doesn’t mean the amount of money you need to expect to lose every time you play. It means the mathematical average loss, which is related to the payout percentage and the house edge of a particular game. Some people think that „average loss” would be a much clearer term than „expected loss”, because the latter sounds negative, but if you understand what it means then it doesn’t matter much what it’s called.
Let’s take an example of a 2% house edge in a certain slot machine. If you bet $5 per spin, the expected loss per spin will equal 10 cents ($5 x 0.02 = $0.1). But in any specific spin you know you’re not losing exactly this amount because anything can happen – from losing your whole wager to winning a huge prize.
The only thing that expected loss represents is how much you’d lose if you played the game forever. Only with infinite spins the percentage of money actually lost would be the average loss, which is obviously impossible to do. Therefore in the end expected loss is just a number, good to keep in mind so that you’re aware of potential risks. The long-term behavior of games of chance can be predicted, but specific random events cannot.