BINARY BETTING REVISITED
Talking to the people over at IG Index this last week it seems that Binary Betting is the growth industry. A Binary Bet is nothing more than a fixed odds bet similar to how Ladbrokes works but is quoted in a Binary format. For example, a high street bookie may be quoting odds of 2-1 for a certain event which would equate to a Binary Market of 66.7. All Binary Bets are settled at either 0 or 100. So if you were to buy the Binary Bet at 66.7 your maximum profit would be 33.3 multiplied by your stake per point. The maximum loss would be 66.7 multiplied by your stake.
In reality all a Binary Bet does is settle at 100 if the event is true or settle at zero if not true. For example, a common Binary Bet is will the FTSE 100 close up for the day? If the index closes even 1 point positive then the binary market will settle at 100. If the FTSE 100 settles lower by 1 point or even 1000 points then the Binary Bet settles at zero. Of course though the Binary Bet is always being quoted during the day basis what the FTSE 100 is doing.
With Binary Betting you can also choose whether to be the bookie or the punter. If you're the bookie you can lay bets, if the punter you can take the bet. With the example above where the Binary market was 66.7 then to lay it you would buy the bet so giving you a maximum loss of 66.7 and a maximum profit of 33.3 (multiplied by your stake per point). If you were the punter you'd sell the bet short giving you a maximum profit of 66.7 with a maximum loss of 33.3. Both sides of the coin so to speak have opposing advantages and disadvantages.
For further information on Binary Betting please see the LearnMoney guide - click here.
Confirmation Of Good Binary Trading Strategies
Back in the March issue of the LearnMoney Newsletter we laid out a Binary Betting strategy that seemed logical and potentially profitable. So we spoke to our mole in IG index to find out what was going on within this market and where the money was being made or lost.
He confirmed that in his personal view the Binary Betting traders that were getting on the best shared two very similar and connected traits
- They were without doubt patient, in that they never forced a trade, sometimes waiting days if not weeks for the market to set up correctly
- They all tended to trade or attempt to trade reversals in the market
And a reversal type strategy was reported in the March Newsletter - Basically wait for a big move one way or the other and then buy a cheap Binary Bet (less than 15 points) on the assumption that the market has a good chance of reversing. If the trade goes wrong then the maximum loss is 15 points (or whatever the Binary Bet was trading at when you bought it). But if the trade goes right then the maximum profit is anything up to 85 points multiplied by your stake.
Trade The Economic Figures
But whereas in the March issue we proposed waiting for a big move to happen before springing into action our mole informs us that many clients are putting on these kinds of trades before significant economic figures hoping for a big market reaction once the figures are released.
The US Non-Farm payrolls or as others call it the Employment Report is always released at 1.30pm London time on the first Friday of every month (next release therefore 3rd December). This figure has the potential to move the Dow at least 50 points if not 100 points in a flash. Obviously this is not always the case but if the figure is widely different from the general market prediction sparks can fly. In fact we would go as far as to say that big moves off the Employment report happen no more than 4 times a year or 33% of the time in today's marketplace.
Many Binary Betting clients are trading say the +100 or -100 hourly Dow Jones Binary Bets before the figure is released on the assumption that the market forecast will be wrong and the figures will come in far better or worse than expected. It must be noted though that a Binary Bet is a tradable market in that it's always moving, you don't have to keep the bet open till expiry. If for example you buy the bet at 15 you can sell all or part of it at 35 should the market move partly in your favour.
