Volatility: Meaning and Definition
Volatility is a term widely used in online casinos to denote the unpredictability of a slot machine’s outcome. A slot will typically either pay out more frequently, but the prizes will be lower, or it will take more time to pay out, but when it does, the prizes will be higher. Some slots are not as extreme as either of the two, and these games are said to feature medium volatility.
Summary
While volatility and variance are closely related, they are not identical. Variance is defined as the expected deviation of payouts, calculated over a longer time period. On the other hand, volatility refers to how often a player wins and how large the prize is. Additionally, volatility is calculated over a shorter time period.
What Is Volatility?
Volatility refers to how frequent and how large a player’s wins will be. Typically, there are three distinct volatility levels, and they are as follows:
- Low volatility
- Medium volatility
- High volatility
If a slot is said to have low volatility, it means more frequent, but smaller wins. If a slot is said to have medium volatility, players can expect slightly larger prizes and moderately frequent wins. Ultimately, if a slot is said to have high volatility, it means that payouts may be sparser, but wins will be significantly higher.
Note: Some slots are said to have low to medium volatility or medium to high volatility.
Why It's Important
Knowing a slot’s volatility helps players choose slots according to their tastes and preferences better. If players are prone to risk-taking, they will usually go for slots with high volatility. On the other hand, those who seek more reliable slots and fewer risks will choose low volatility casino games.
How It's Used
While volatility and variance are sometimes used interchangeably, there is a difference between the two terms. Namely, variance refers to the expected variation of the payouts of a casino game, whereas volatility measures this trend over a shorter time period.
To fully understand the nuances of the two terms, please refer to our detailed blog post.
