Financial betting is similar in nature to sports CamBongDa except that you place your bets on the outcome of a market rather than a match.
Financial bets are similar to sports bets.
* stake or wager – How much you’re willing to place.
* Payout – The amount you will get if your wager wins
* Return or odds = The ratio of the payout to the stake
* Outcome – The “prediction” that you make
For example, here are some ways you can place a bet:
* Bet – $10
*Payout – $20
* Return – 100%
*Result – The FTSE (London Stock Exchange Index), to rise between 13.00 and 14:00 today
It’s really easy, right?
So why not place your bets on the financial markets.
It is simple because it is.
* You can place a bet starting at $1, as it is less risky than trading.
* It’s exciting
* You can make money!
This last point is crucial. It is possible to make money. You can also lose money.
To be long-term profitable, you must find low-cost and mis-priced wagers. What does that mean?
Businesses are financial betting services. They have expenses to meet and investors to please and they strive to make money. They make money by charging fees for their bets.
They don’t charge any fees (such $5 per bet) nor commissions (such 2% of the winnings). Instead, they use a spread (or overround), which are two different ways to look at the same concept. We’ll refer to it simply as a spread. If a bet’s fair value is $x, they will sell it for $x + y. Y is their spread. Their betting profits should equal the spread over time and on average.
It is important to only place bets with low spreads, eg “good price”, because this will make it easier for you to win. If you make accurate predictions, you will be able to profit long-term if the spread is not too low. You have little chance of winning if the spread is too high, regardless how accurate your predictions are.
It is difficult to determine what the spreads are for betting services. Understanding how they price bets will help you understand the spread and how high the price is. It is often very simple to calculate the spread. We’ll get to this in a moment. It is helpful to understand how betting companies determine the “fair value”, which is then multiplied by the spread to get the final price.
Optional financial bets can be called “binary” because they have a binary outcome. You either win or you lose and there is no in-between. The Black-Scholes model is a widely accepted method of determining an option’s fair value. This model is used widely in financial markets and other industries to determine fair value.
The model is complex, but it is easy to summarize: price rises as time passes and asset volatility increases. Volatility refers to how much asset prices change per unit of time. If one bet is placed for one hour, the price for one-day bets will be higher. If one bet is placed on a calm market and the other on a stormy one, the stormy market price will be higher.
You can find a lot of information about “predicting the markets” by simply searching Google for that term, “winning trading strategies”, or “make money in markets”, etc. Most of the information you find is garbage.
We would be happy if we had a foolproof way to make massive profits on the markets. This isn’t the case. Reality is that markets can be unpredictable and you only have a 50% chance to be right. If you can be correct 55% of time, then you are doing a great job. You are doing a great job if you can correct 60% of the times. You are world-class if you can correct 70% of the time.
You should aim to achieve a 55-60% return on investment. You can achieve a return of investment (ROI) of 3-8% if you are able to do this and only make low-cost bets.
How can you achieve a 55-60% win rate? Remember that financial bets can only be won in pairs. The probability of each side happening must add up to 100%. For example, if one side is 60% then the probability that the other side will occur must be 40%.
We recommend that you search for bets priced at a favorable price. This is when the implied probability in the bet price is lower than the probability implied by your predicting method. You will win if you choose the pair with the favorable mis-pricing.
Let’s take an example. Imagine a fair coin with a 50% chance for heads and 50% chance for tails. You would be foolish to not place a bet on the heads if you were offered a price where the heads were assumed to have a chance of 45% and the tails 55%. Why? They are pricing heads as though it will win 45% of all the time. But, it is only 50%.
How do you spot low-priced bets, then? There are several ways to do this:
The betting service takes the easy route and prices each side of a wager at a 50% chance, when they really are only at 50%.
The betting service is too complicated and prices each side of the bet differently from a 50% probability, when they should be at 50%
The pricing error by the betting service is not correct and the combined probabilities of the pair are not equal to 100%
There are millions of financial bets that can be made at any given moment. It is difficult to find the wrong-priced ones, as most bets are correct priced.
You may be wondering if you have any experience in financial markets. What about *predicting* the markets? Using economic news, chart patterns, or tea leaves to accurately predict what the market will do? Why don’t you help me?
Good question. The answer is that we believe in the random walks hypothesis. This hypothesis states that financial asset prices are unpredictable for most of the time and especially for the short time periods most financial bets cover. The Black-Scholes model and therefore option pricing and financial betting pricing assume random walks. We don’t try to predict markets, but instead focus on finding low-cost, favorablely priced bets that will give you a 3-8% ROI per bet.