Betfair Official Blog

Beginners This Way Please - Lesson 3

Turn your binary betting into trading...

So after last week's session, you should be as snug as a bug in a rug when betting on binary markets, and understand why in many experts' eyes, they are more lucrative than fixed odds. Well done!

But what if you simply can't wean yourself off the drug of fixed odds? Well converting from one to the other is even simpler than nationalising a bank, so even you Mr Darling should be able to get a good grip on it.

Basically, a buy bet is equivalent to a back bet, and a sell bet is equivalent to laying a bet.

Converting a Binary Price to a Decimal Odds Price:

Decimal Odds Price = 100 / Binary Price
Conversely: Binary Price = 100 / Decimal Price
e.g. a binary price of 50% is the same as 2s (100/50) on the old Betfair prices. A Betfair shot at 5s would be 20% (100/5) in binary prices.

What is Trading?

As a savvy Betfair customer, you may already be comfortable with the concept of trading a bet 'in-running.' Binaries are perfect for this as the prices move constantly in line with the fiercely volatile financial markets, until the market is ready to close. This allows for 'quick-profit' betting as well as 'damage limitation' closing out.

More often than not, financial traders do not keep a position open until a market expires, but are looking to profit from very short-term price movements by closing out open positions with an equal and opposite trade. This is called 'closing out'.

For example, if you have opted to buy a bet at 56, and subsequently the price has risen to 78, you may now sell the bet and take a 22 (78-56) x your stake profit. ALWAYS REVERSE THE TRANSACTION.

This could be done for one of two reasons:
1. To take a guaranteed profit now, rather than wait for any potential slip-ups, which could see the price drop below 56, or worse still, eventually settle at zero.
2. Bank some quick cash to use on another bet.

Alternatively, the market may be moving frantically against you, and so you will wish to take a quick loss, rather than wait for the whole catastrophe to unfold.

e.g. you sell a bet at 24, but the market rallies up to 32. Rather than risk it settling at 100, and the susequent 76 (100-24) x your stake loss, you buy at 32 (ALWAYS REVERSE YOUR TRANSACTION) and take an 8 (32-24) x your stake loss.

So to close a bet, and lock in a prodit/loss, you simply do the opposite of the original transaction.

The Tradefair Binaries interface has two main features to make trading easier:
* your realised P&L amount for the market
* the functionality to Close Out your position