Binary Trading. John Piper

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      3. Buy low and trade the position

      We have touched on this under cheap bets when I suggested taking out a few points profit. However if we are going to trade the position we do not need to buy quite so cheaply as we will be quicker to get out.

      Look again at how binary bet prices move as set out at the start of Chapter 6 of Binary Betting. I made the point that action between 35 and 65 can be jet-propelled. But below 20 and above 80 it gets much slower.

       Why not turn that to your advantage?

      Buy between 30 and 40, then look to exit above 60. Or sell between 60 and 70, then look to exit below 40.

      Entering at those prices gives you the possibility of very quick profits but if price moves against you it would be a relatively sluggish process. It might still be fast, ultimately that depends on action in the underlying market, but profits should come in faster.

      If the bet does go awry you should have plenty of time to get out at your chosen level. Maybe you only want to risk 15 points, or 20, and you simply close out if the appropriate level is hit.

      With an approach like this you will need to consider your strategy carefully and here are some guidelines:

      1 You should ensure that your average profit equals at least two or three times your average loss.

      2 You must ensure that you profit at least half the time.

      3 If we were talking about spread betting I would add that you must not let losses run away – but that is one of the great benefits of binary bets – losses can’t run away!

      To end this section I will outline one critical element of system design. If you go for smaller profits there will be more of them and this is important as most traders have difficulty with lots of losses and a few profits. We all like making money most days if possible. But clearly the important thing is to come out on top overall and these two goals sometimes prove mutually incompatible.

      4. More complex strategies

      Here are a few ideas which you may find useful:

       The Tunnels and the OneTouches might be used as an unusual stop. With FTSE at +/- 15 a 55/55 Tunnel may be priced at 70/75 depending on volatility and time. Buying a future/spread betting away from the Tunnel and selling the Tunnel might be useful. If the Tunnel is touched you keep your 70, if the future benefits you make money on that. This could be combined with an in-the-money up/down bet.

       Sometimes it may make sense to buy longer dated up/down bets (i.e. daily) and sell shorter dated ones (i.e. hourly).

       You will sometimes find that different betting sites offer arbitrage opportunities as touched on in Chapter 5 of Binary Betting.

       If you buy a OneTouch and sell another at a different level you will achieve profit/losses at different levels. For example, if FTSE is at 6000 you might buy the 6040 OneTouch at 50 (bet #1), then sell the 6060 at 15 (bet #2). As these are OneTouches it is the high of the day that is important and the close or low is irrelevant. Here is how these bets would work out:

       If FTSE’s high is below 6040 you lose a net 35 points (50 down on bet #1 and 15 up on bet #2).

       If FTSE’s high is above 6040 but below 6060 you make 65 points (50 up on bet #1 and 15 up on bet #2).

       If FTSE’s high is above 6060 you lose a net 35 points (50 up on bet #1 and 85 down on bet #2).

       If you enter the bets in the example above at different times then you may get better prices but this is not guaranteed.

       You can also put in place similar structures with Tunnels and/or other bets.

      I have kept this section fairly short and sweet as more complex structures are something of an acquired taste and those so inclined will want to do the research themselves. The ideas above may provide a useful starting point.

      Having looked at four different groups of strategies, we’ll now turn to research.

      Research

      It is important to research betting ideas to give yourself better odds of success.

      As an example I will look at a fairly high priced bet which would be expected to come good. I include the Dow 100/100 Tunnel in this category. This bet goes to 100 if the Dow stays in a range 100 points either side of the prior close. It goes to zero if the Dow touches those extremes.

       But how often does it do this?

      This is a good example of something you can test for yourself. Get hold of daily data on the Dow going back a year and work out how often the Dow will stay in this Tunnel. You will find it is well above half the time.

       What is the price of the bet?

      It will vary from day to day but what price would you find attractive? Once you know that, all you need to do is monitor the market and then take the price when it becomes available.

      Conversely, the 60/60 Tunnel on the Dow will be taken out far more often and if you trade these instruments you need to be aware of the statistics. If you know that the Dow or FTSE has a less than 25% chance of exceeding a range and you have bought a Tunnel with that range it will make far more sense to hold to expiry as the Tunnel will close at 100 if the market does stay within the range. But if the odds are nearer 70% that would be an entirely different matter.

      (I have given partial answers to some of the questions raised by the above in the Appendix. There is also more information in Chapter 10.)

      It is important to check out such data yourself as this could be the foundation stone of your trading system. If you are going to become an expert in your system you need to put in the groundwork.

      One of the reasons why so many fail at trading is that they simply do not do the background work. You need to decide on your style of betting/trading and then research every aspect exhaustively.

      In Chapter 6 of Binary Betting I gave as an example a high bet on the Dow. Here too some simple research can give you extremely valuable information. How often will the Dow close in a range between 60 and 80? It is not difficult to find out and once you know you can judge whether this bet gives you an edge.

      Pricing and probability

      The pricing of a sports bet

      With a sports bet all the time the game is played, or the race is run, the binary bet prices will be changing giving you more opportunities.

      With a football game the price will reflect the probability of either side winning the game, some of the key factors being:

      1 the number of goals scored and by who,

      2 the time remaining, and

      3 whether any men have СКАЧАТЬ