Fixed Odds Trading - Complex Bets

OK, let's take a look at some of the more complex  types of bets available, and how we can use them in our fixed odds trading strategies.

Fixed Odds Trading -  Complex Bet Types

• Barrier Range Bet - the barrier range bet, as it's name implies sets two barriers to a price, so you would use this type of bet when a currency pair, stock, or index is trading within a narrow range. In other words the market is moving sideways. Now with this bet, you want to make sure there are no major announcements or news items that could introduce volatility to the market, as success lies in having little or no volatility. So in buying the bet there are two barrier points quoted, one above the current market price, and one below. If, during the life of the contract, either of these barriers is touched then you would lose the bet. So in summary, we are looking for an instrument that is trending sideways in a relatively narrow trading range. In terms of risk, the longer the contract is open, then the greater the chance that one or other of the barrier points will be reached, so judge this trade with care. Of course in addition, you will have to judge the range - the closer the range then the higher the probability that the either one of the barriers will be broken, but the higher would be your return. This is what fixed odds trading is all about.
• Double Touch Bet - the double touch bet is a mirror image of the barrier range bet, but in reverse. In other words for the double touch bet, we want the market price to reach the barrier points, both above and below in order to have a winning bet. For this trade to be successful we are looking for volatility in the market so that we have a chance of both barrier points being touched or broken. Now it is important to note that a barrier touch is good enough to win, but that both have to be touched. If only one is touched then we would lose. As an example we might use this type of bet when a stock is approaching a news release, or we feel a currency pair will become volatile due to economic data being announced. A classic example ( although over a very short time frame ) are the Non Farm Payroll figures released on the first Friday of every month in the US. The GBP/USD pair tend to move significantly in one direction, followed shortly afterwards by a reversal and move in the opposite direction. In terms of risk, the closer the barrier range is to the market price, the more chance there is that the event will occur, so your return will be lower, for a smaller risk. Finally,  the longer the trade is open, then the more chance you have of success, but again this will be reflected in the odds!
• Double Up - double up bets expire at the close of business on the expiry date of the bet, which can either be on the day of purchase itself or up to 7 days in the future. This type of bet pays twice the premium if the market rises above a given level between the time of purchase and the close of trading on the predetermined expiry date. A double up contract is actually a bull contract but intraday.
• Double Down - this is the opposite of a double up bet, and  pays twice the premium if the market drops below a given level between the time of purchase and the close of trading on the expiry date selected - a bear contract but intraday
• Intraday Double Up - this is s variant of the above double up trade, but allows you to trade intraday between specific periods in the day. With this trade you are betting that the instrument will rise in value between two given hourly times in the day. With this bet you have the ability to set both the starting time and the finishing time, which can be as short as 10 minutes. A typical example might be a currency pair which you expect to rise in the next hour - perhaps you have seen a particular candlestick pattern, maybe a tweezer formation, or a bullish engulfing signal. Again you will be paid twice the premium if the bet is successful and is an excellent option for currency trading.
• Intraday Double Down - the opposite of the double up, in this case we are looking for a fall in price in the contract time that we have set. Here we would  be looking for a bearish engulfing signal, or other signs of weakness. The same principles apply as for the double up trade.
• Super Doubles -  ok, the last trade that I want to have a look at is the super double - these work in the same way as the intraday double up intraday double down bets except that here two bets are built into one. In essence the bet is based on the market movement between three given times. For example you might bet that a currency pair rises between 9am and 10am and again between 10 am and 11am. If this occurred you would win four times your bet. This is not for the feint-hearted, and please remember that in all these bets, this is fixed odds trading so whilst a trade may look very inviting in terms of return, just remember the odds that have been set for this event to occur. !!

OK - now there are some other contract types, but these are the principle ones which I hope have given you a flavour for what fixed odds trading is all about. Remember with all the above trades, you must understand the risk and return on each trade, which is just like any other form of betting.

Backing the 100-1 outsider to win the Grand National may seem an attractive idea and we can all dream of placing a £100 win bet and spending our winnings, but realistically is this sensible. Fixed odds trading is using our knowledge of the markets and combining it with a fixed risk/reward trade. We do not have to worry about margin, or leverage or letting profits run or cutting losses short, and in many ways this form of trading, removes much of the emotion which is so damaging to us as traders.

OK - now let's look at one or two examples of how fixed odds trading works in practice.

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