|Financial - Beginners Guide to Binary betting
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Written on Sunday 28th of October 2012
Introduction to Binary BettingBinary betting is a form of financial betting that has grown tremendously in popularity. This is largely due to its simple and exciting format for trading on financial markets. Binary betting involves placing a bet on whether an event is likely to occur or not. An example of this, is if a financial market like the FTSE will finish up or down at the end of a days trading.
The simplicity comes in the betting, binary bets are quoted on index between 0 and 100, with the possibility of only two outcomes occurring. That way you can correctly gauge how much you can potentially win/lose before you place your bet. You also have the option of being able to sell your bet back early in certain cases to cash in on profits
Benefits of Binary betting
There are several key differences between binary betting and financial spread betting. The most significant being that you can always pre-calculate your potential win/loss before you bet. This may allow you to stake an amount you are more comfortable with, as you will know you can afford to lose it. Many prefer Binary bets because of there complete simplicity, with bets either finishing on 0 or 100.
Principles of Binary Betting
The word “Binary” is commonly associated with something possessing merely 2 possible values. Binary betting is best understood in the form of an example. In this case we will consider the FTSE closing up or down at the end of a financial trading day.
If the FTSE 100 closes UP at the end of the day, this will confirm that the event has occurred. Therefore the bet will finish up on 100.
If however the FTSE 100 finishes DOWN at the end of the day then the event will not have occurred and therefore the bet will finish up on 0.
Let imagine that it has been quite a busy day trading, but the market is down 2 points from its opening level. Therefore the quote from the Company offering the binary bet is 38 - 42.
If you feel that the market is going to keep going down and close even lower then it already is, then you may choose to sell at £1 per point. (£1 for every point below 38).
Therefore you know that you will either win £38 (The difference between 0 and the lower value of the quote, which is 38) or lose £72 (The difference between 100 and the lower value of the quote, which is 38).
If however you feel that the busy day trading will push the market up then you might choose to buy at £1 point. If your prediction comes to fruition then you will pick up £68 (The difference between 100 and the higher value of the quote, which is 42). If not then you will lose £42 (The difference between 0 and the higher value of the quote, which is 42).
This is binary betting in its simplest form and there are a number of variations on this theme, but the principle is always the same.
Pitfalls of Binary Betting
Although it has been clearly pointed out that your bet is limited to the binary index, it is still betting. You can quite easily fall into the trap of putting lots of bets on during the day, only to see them all go against you. It is highly advisable to start small and work your way up.