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Example Trades

So, having looked at some of the trades available to us for our fixed odds trading, I thought it might be helpful if I gave one or two examples of the types of bets and how you would use them, which I hope will help to clarify some of the terminology. I haven’t given examples of a bull bet or a bear bet as these are very straightforward and it is simply a case of opening a position where you believe the market will be higher or lower in the contract period. These are the simplest of all fixed odds trading bets and probably a good place for you to start as a novice trader. The timescales offered will of course vary, according to the markets and the volatility in the market at that time, but the principle remains the same. If you buy the bet and are correct then you will win. So let’s have a look at one or two examples of the other bets available.

  • One Touch – Let’s take GE as an example, and assume that the stock is trading at $35. You believe that the stock is set to rise to $37 in the next few days. You therefore decide to buy the bet ” I wish to win $200 if GR stock trades at or through $37 in the next ten days” at $67. Over the following days, you are proved correct and on day eight, the stock indeed touches $37. At this point the trade is closed as you have won, so you do not have to wait until expiry to claim your winnings. You will only lose this bet if the GE stock never touches $37 which it only has to do once for you to win.
  • No Touch – Now let’s look at a currency trade for the no touch, which is the opposite of the one touch. Assume the  EUR/USD is currently quoted at 1.46295. You believe that the EUR/USD will continue rising and will not hit the 1.4500 level during the next 20 days. So you price this bet: I wish to win £ 5000 if during the next 20 days, the EUR/USD never touches 1.4500.  You enter the details of the bet and hit the calculate cost of this bet icon, which gives you a purchase price of £1930 (i.e. £5000 – £1930 = £3070 potential profits). You are satisfied with the risk-reward  ratio and  decide to buy the bet. If, unexpectedly the Euro starts losing ground to the Dollar and slips down to 1.44 in 12 days time, then you lose your stake of £1930. On the other hand if the EUR/USD is at the 1.4509 mark on the close of trading of the 20th day, then you win your bet since 1.4509 is greater than 1.45.
  • Barrier Range – For the barrier range bet, let’s  assume we have been watching a share, Lloyds TSB which has been trending sideways for several weeks, and is currently priced at £4.50. In your view this is likely to continue for some months to come, and you therefore decide to see what bets are available for a barrier range bet, where the share price does not touch or go above 5.00, or touch or go below £4.00. Whilst you are confident, you do not want to risk too much as you are still learning, so decide to price the following bet ” I wish to win £50 if the Lloyds TSB never touches or trades through £4.00 or £5.00 in the next 20 days” You enter the bet and the cost is calculated as £20, which gives you a profit of £30 if the bet is successful. Having decided you are happy with the odds, you confirm the bet. Over the next 20 days the share price continues to trend sideways and the bet expires on day 20 with a win. Alternatively of course, had the share price suddenly moved one way or another ( perhaps on bad news in the financial markets ) and touched £4.00 then you would have lost. The barrier range bet is an excellent way to trade markets that are moving sideways, in much the same way when trading covered call options – we are looking for low volatility throughout the trade.
  • Flash Up – A great way to trade for currency trading which I use myself for scalping trades . Let’s look at a  USD/JPY trade lasting  7 minutes where you have decided that prices are going higher. You buy the bet at 14:00:26 GMT, which is the start time. The next tick is received at 14:00:28 and is valued at 121.26. This is the entry time and value. The 7 minutes elapse and the end time is 14:07:26. The next tick after this (the exit tick) is used to calculate the price of the contract. In this case, the next tick occurs at 14:07:27 with value 121.32. This is the exit time and value. Since the market has risen, you receive full payout. Flash up, and flash down bets are available from 2 minutes to a maximum of 20 minutes.