BetOnMarkets Daily Report (10th September)

** Dave Evans will be away this week so there will be no market report until Monday the 13th.

Until then, you can enjoy Dave's five part Fixed Odds trading strategy guide.

Part 5 - Applying technical set ups to fixed odds trading

Certain bets are best applied in certain situations, based on the trend and volatility. I've taken the most common bet types below and expanded on their best technical set-ups. I don't mention any broad fundamental based inputs here for simplicity's sake, but you should be aware of big up coming announcements like interest rates and payroll numbers in the US.

Volatility is a big factor in the success you'll achieve with fixed odds trading. For example, when the markets are swinging wildly as they did in September, then it might be better to avoid trade types that benefit from low volatility, like 'no touch' bets or 'stays in' bets.

One Touch bets - You believe the market will touch a given level, at least once, before the end of the contract. The market only has to touch the level you have chosen as a one touch to win, which could be just moments after the bet is placed, days after, or at the last moment of the last day of the bet.

Time is against you with 'one touch' bets, because every day that the markets move away from the 'one touch' target, the odds are moving firmly against you. You need to pick the situations where the market will not only move, but will move pretty quickly.

The best time for 'one-touch' bets is the calm before the storm. If you know there is a big announcement coming up, like a crucial interest statement, or Non-farm payrolls in the US, the chances are the market will be coiling up ready to spring when the announcement comes. Just before big announcements many traders are nervous about taking big positions, which might make it seem like a low volatility environment, when in fact it is about to get very busy.

Remember just because you are in a high volatility environment, it doesn't mean that it will continue, so be wary of placing a one touch trade assuming that the market will continue to move rapidly. Chart formations might suggest a significant trend and all the facts might lead you to assume that it can continue, but markets are very unpredictable, and can quickly disappoint.

In the following example, an "In/Out: Goes Out" trade was placed just before the US interest rate announcement in September 2007. An "In/Out: Goes Out" trade is two "Touch" trades in one, you're predicting that the market will touch either one of two points in the future. You just need the market to move in either direction significantly for you to win. If it bumbles around and doesn't go anywhere you would lose.

Leading up to the interest rate cut, the market was very cagey, as nobody wanted to take on any big positions before the highly important US interest rate announcement. If they cut rates the market was going to shoot upwards, if they left them on hold or didn't cut them enough, the market was going to drop. However there was no way of knowing which way the decision would go. What seemed highly likely, was that the stock market would move significantly in either direction on the news.

On the day before the announcement (the 17th), the S&P500 was around 1480. An up or down trade with the triggers set as 1510 and 1480, could have been placed with the expiry 9 days later. Betonmarkets were only paying out odds of 1.07 on this one, but to my eyes the post interest rate movements weren't fully priced in yet, making this a "value" trade. As it turns out the US surprised many by cutting by half a percent. The upper one touch level was hit within a day.


In hindsight perhaps these levels could have been stretched out further for an even bigger gain, it's always easy to be wiser in hindsight.