Forex Trading


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Alternative Forms of Trading

What Is Sports Trading?

The simplest explanation I could think of: Sports trading is the practice of placing two bets against each-other, on the same selection, in order to profit. In essence that’s it. Although it’s an extremely broad explanation, in a little more detail… Sports trading is just the term used to refer this kind of behaviour on a betting exchange. Be it Betfair, Betdaq, Matchbook or any other. One way to explain it is: sports trading is just like stock trading. Instead of buying and selling shares of company, we buy and sell bets on sporting events. The real beauty of sports trading is that we don’t care who wins or loses the event. Just if the price moves. Because of this, we don’t have to pick winners to be a winner. A stock traders main aim is to buy low and sell high. The principles are exactly the same in sports, but we lay low and back high. Making a profit, regardless of the result.

How Sports Trading Works

Sports exchanges work just like any other financial markets. Traders from all around the globe use the exchange to place bets with each other. Betfair acts like a referee. By taking real-time information from thousands of football matches, horse races and other sports, Betfair makes sure the winners get paid and the losers pay up. For providing this service, Betfair take a 5% cut on all winning bets. When you place a bet at a traditional bookmaker, you are (almost) always placing a back bet. This means that you are betting that something will happen. By accepting your bet, the bookmaker is effectively placing a lay bet. They are betting against you that your outcome won’t happen. Using a betting exchange such as Betfair, allows us to place both back and lay bets. By doing this multiple times, we can produce a guaranteed profit no matter what the outcome. I’ll show and explain the mechanics of a successful trade in a second. Before I do, keep in mind that betting exchanges are very different to using a bookmaker in the sense that: •they won’t limit or ban wining accounts •you’ll nearly always get a better price

(1) Opening Bet: To make a successful trade in any instance, we have to have a reason we expect the price will move – or at least get both our bets matched. Most sports punters use tipster forums and free capper picks website like Odds Capper and and Betting advice and others. For the sake of this explanation, we will assume we’re very confident the price will move on Mershardal. In this case Mershardal is likely to drift in price, being shorter than it currently is before the start of the race. We open the trade by placing a lay bet at [4.8] 5 minutes before the start. Our lay bet of £100 is fully matched, as seen in the image below. At this stage we merely have a lay bet (liability expressed on the left).

(2) Closing Bet: As expected Mershardal’s price has drifted. This leaves us in the opportune position. We now have a bet that is of ‘value’ when compared to the current market price. Why? Because if we were to lay at the current price, we would have to outlay more liability. Assuming we now expect the price is where is should be, or better still, higher than it should be. We simply need to ‘trade out’ of our position. Closing the initial bets liability (amount we previously stood to lose). Notice we now have a position were we profit should Mershardal win the race, but nothing should the horse loose.

(3) Hedging/Greening: In order to spread our result, be it profit or loss – we need to hedge up. Otherwise known as greening. To do that, I personally use software (it saves extra calculations). Basically, there needs to be an extra lay bet in our example to guarantee a profit. No matter what happens – before the start of the race.

High-Low Binary Option Example


The Upside and Downside

Risk and reward are known in advance, offering a major advantage. There are only two outcomes: win a fixed amount or lose a fixed amount, and there are generally no commissions or fees. They’re simple to use and there’s only one decision to make: is the underlying asset going up or down? In addition, there are also no liquidity concerns because the trader doesn’t own the underlying asset and brokers can offer innumerable strike prices and expiration times/dates, which is an attractive feature. The trader can also access multiple asset classes anytime a market is open somewhere in the world. On the downside, the reward is always less than the risk when playing high-low binary options. As a result, the trader must be right a high percentage of the time to cover inevitable losses. While payout and risk will fluctuate from broker to broker and instrument to instrument, one thing remains constant: losing trades will cost the trader more than she/he can make on winning trades. Other types of binary options may provide payouts where the reward is potentially greater than the risk but the percentage of winning trades will be lower. Finally, OTC markets are unregulated outside the U.S. and there is little government oversight in the case of a trade discrepancy. While brokers often use external sources for quotes, traders may still find themselves susceptible to unscrupulous practices.

Planning Futures

A Proven Approach


What Are Binary Options?
