Cost Of Fixed Odd Financial Betting

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I have always liked the idea of fixed priced betting. I have even dabbled in Binary Bets but apart from one short period I have never really made much money on them. These days I pretty much stay away from such financial betting. The main reason being that it is rediculously expensive.

“Oh but there is not cost to fixed odd betting” I hear you cry. Well there is but you just can’t see it. The prices you see from these fixed odd companies are all done automatically by some clever computer program that in essence calculates probability of a price being ‘hit’ given several variables like, time left in the trade, the average daily range, current trend etc.

Every now and then I check the pricing of certain trades on fixed odd betting sites just to see how well or badly they are priced. The best way to do this is go to site like betonmarkets.com and price a trade for a ‘one touch’ bet and then get the price for the ‘no touch’ equivalent bet.

For example I am currently looking at GBP/US. I requested a price to earn $100 of the forex pair hits minus 100 pips from the current price in 1 day. The cost of the bet is $39.47. This means if the trade wins you can win £100-$39.47= $60.53

The opposite bet i.e that the price will not trade through -100pips from the current price in 1 day is currently priced at $88.73. This means if the bet won you would win $11.27.

Naturally the trades will have a slight bias in one direction than the other but not only is the cost of the trade more than double the difference in potential profit between the two trades is 5 fold. In essance in my example the cost of the bias and their spread is $28.2. Which is massive when you are considering you are pricing a bet for winning a maximum of $100.

If the trades were evenly matched you would expect something like:-

Trade 1: Cost =40 Profit =60
Trade 2: Cost =60 Profit = 40.

But obviously they wouldn’t make much/any money out of such trade pricing. But a vast majority of their pricing difference is their “added” in spread that you don’t see. This is where they make their margin. And personally I think their pricing is too far off the real probability of trades to make it worth while trading. This pricing effects the “value” of the trade so much that it would be better to trade a similar position directly in the market.

I am sure there are some who have made plenty of money from fixed odd betting, and I would be interested to hear their thoughts, but in my experience most people who have tried fixed odd financial betting don’t choose it as their main method of trading.

Maybe this means there is a way to used fixed odd pricing on one side of the trade and “real” market positions on the other to crawl back that $28.2 ‘spread/bias’ but that is not something I have looked into yet.

Maybe one should?

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