Winning Fixed Odds Strategies

Fixed Odds betting has some big advantages over financial Spread Betting especially for those starting with smaller accounts. With Spread Betting you’re paid by the number of points you are correct by, with Fixed Odds you can make a large return with the market moving just a few points in your favour. Another massive advantage of Fixed Odds over Spread Bets is that you don’t need to worry about using Stops.

Apart from One Touch bets, with Fixed Odds you are buying time, similar to an option, so your bet could be wrong for days or weeks yet by the time expiration comes you can still end up in the money and win. Many traders have the right view on the market but their timing tends to be out and they are stopped out when using a spread bet, only to see their trade move in their predicted direction. By using a Fixed Odd bet this takes away the worries of day to day price spikes.

Here are 8 Top Tips for Fixed Odds Trading

1. You can make money from Up, Down or Sideways movements

With fixed odds you can make money from markets moving up, moving down or staying in a sideways range, a concept that even professional traders find hard to grasp. Even after big falls in the markets in 2008 most traders are still conditioned to want to buy low and sell high.

Remember that markets fall faster than they rise so down bets can make quick profits. With fixed odds you can back shares, currencies and indices to fall all with limited risk and the most you can lose is your stake which can be as low as £10.

Sideways markets can be backed using Barrier Range bets. Until Betonmarkets introduced these it was very complicated to make money from range bound markets and you would have had to use options strategies such as selling options. Now you can do it with a simple bet and with strictly limited risk.

You would be surprised how often a currency, share or index actually stays in a range – until recently you could not profit from ranges.

2. Learn to love volatility

With fixed odds, bookmakers such as betonmarkets.com you can place an UP/Down bet which basically means “I don’t know what the market is going to do but I think it’s going to move.”

As long as the market moves Up or Down and breaks above or below your predicted barrier you will be paid out. This bet is ideal after a market has been going sideways in a narrow range for awhile as the odds of a breakout becomes more probable. Those that follow charts can look for contracting triangle formations. As the price squeezes you know at some stage it will breakout normally with a big move. With Up/Down bets you don’t have to predict the direction of the breakout as long as it does breakout within your predetermined time.

Tip: Buy a bit of extra time. We all want our bets to payout as quickly as possible for the highest payout but I suggest taking a slightly lower payout and buying a few extra days of time. So let’s say your offer is 40% for the NASDAQ touching 1550 in 14 days, try going for 18 days, the extra few days have saved me on many of my trades.

3. Use One Touch bets

Markets tend to be like lightening, they look for the path of least resistance. When a market breaks above a resistance (ceiling) level you will tend to find the market will carry on in the same direction for at least a few more days. Just as a market breaks down through a Support (floor) the market carries on falling until its next support.

Using a One Touch bet traders can back these events, remember you’re saying the market just needs to touch the given level and that would be enough to payout.

So let’s use a recent Gold example. Gold started to build up momentum and broke over the $830 an oz level, looking at the chart I could see $850 was the next potential target, so I placed a ONE TOUCH bet that Gold would touch $850 within the next 14 days. Gold went on to hit $870 within a few days, so the bet paid out. Of course, if Gold did not touch $850 during the 14 days then my bet would have expired worthless.

If I do see the bet going against me and time is running out I can sell the bet back and look to salvage some of the stake.

A quick tip – markets have a tendency to move to round numbers both on the upside and downside, you often see this happen in currencies, indices and individual shares. Look for possible moves to next levels, especially on falling markets, if you look at the way the Dow Jones fell from 9,000 to 8,000 in a matter of days back in October 08 this demonstrates the point.

4. Balance Risk and Reward

Everyone likes the big payouts; however, you have to remember there is a reason why you’re being offered a 300% return, that’s because there is a fairly slim chance that the bet will not payout. On the opposite end a 1% return is hardly going to make you rich and should the bet go wrong you would lose a large stake.

The simple answer is to look for a balance and mix and match trades. In my own trading I am looking for returns between 40% to 100%.

Tip: Look to tweak your bets. Before you accept the bet you will be shown the odds and asked to confirm whether you’re happy or not. You can adjust the levels and dates and see how this affects your payout.

5. Be a disciplined trader not a reckless gambler

After a good run many become over confident and start taking stupid risks. After a poor run many try to play catch up and want to make their losses back fast, both actions are the easiest way to lose your trading capital. Many books have been written on Money Management with complicated formulas. The key should be that no one trade should ever cause you so much damage financially or emotionally. How every sure you are the XYZ is going to rocket, only a percentage of your trading bank should be risked.

6. Run two bets together, trading a pair

Another strategy is to trade two different markets that have a negative correlation. For example, Gold and the US Dollar. Gold is priced in US$ so if the dollar weakens then Gold tends to rise. Gold is also used as a hedge against falling currency values. So you could look to have a Bear bet on the US$/Euro and a Bull Bet on Gold.

The Japanese Yen and the US stock marketsis another pair that can be traded. You may have heard of the Carry Trade, where the Yen is sold as money is borrowed in Yen and then the Yen are converted and invested in higher yielding currencies such as the New Zealand Dollar.

If you look at the Euro/Yen and say the S&P500 you will see that as the Euro/Yen weakens (so money is flowing back to the Yen which is the funding currency)) as does the S&P500. If you see a funding currency strengthen such as the Yen it means traders are taking less risk which is not good for equity markets.

7.Seasonality – History does repeat itself in many markets

My trading style uses technical analysis with seasonality. Most know what technical analysis is however seasonality is not as well understood. Seasonality is using the calendar and past results to forecast the likelihood of the same happening again. For example, Gold tends to be strong in September where as stock markets tend to be weak. Periods around market holidays such as Christmas, Thanksgiving, Independence Day and the first few days of the month tend to be stronger. The well known saying, “Sell in May and go away,” whilst not perfect, has worked as a good base to a trading system which I used to make large profits in 2008. You will also find seasonality in commodities and some currencies. Watch the Yen strengthen around March time as large Japanese companies close their financial books and tend to put Yen back on their balance sheet.

8. Combine Spread Bets and Fixed Odds

Let’s say you have a core view that the FTSE100 is going down and you have placed a spread bet to back this idea. After a week or so the FTSE100 starts going up or sideways, you could of course close your spread bet or you could leave it open and look to place a fixed odds bet to run along side it, maybe a barrier range, so whilst the market is going sideways your spread bet will not be making money but at least your fixed odds will make a profit.

Are you missing out?

Many using Financial Spread Bets or CFD’s have a tendency to look at fixed odds as a poor mans options market or haven’t treated it as a serious trading platform.

Fixed Odds financials are now over 10 years old and have come along way and offer both small and not so small clients a way to back markets in unique ways. I have personally used Betonmarkets.com since 1999 and have traded a good few million pounds worth of bets during the last few years. I can assure you that it’s a serious trading vehicle that can compliment both spread betting and other forms of investing and its popularity will continue to grow. You can open a fixed odds account within minutes and start trading with as little as £25.