Binary Betting - Risk and Reward

OK - we talked a great deal about the mechanics of how binary betting actually works, but what I would like to do here is to explain graphically the risk reward profiles when you actually enter a trade, so that you have a mental picture of the trade in your mind. It may seem quite basic, but I find it helps new traders to binary betting understand the risks and rewards better, when presented as a picture.

Binary Betting - Buying

OK - as I'm sure you will remember by now, when we buy a binary bet, we are agreeing with the event outcome. In other words we think the event will happen. Now intuitively we know that the less likely something is to happen, then the more profit we will make if it does - just think of the 100/1 rank outsider - our risk may be very small £1, but our profit could be very large £100. Conversely, if an event is very likely to happen, then our profit is relatively small, but our risk very high - we have to bet a lot, to win a little! So in a graphical format for binary betting, it looks like this :

As you would expect when we are buying a bet in the 0-24 region, then the risk (the red area) is small but the return ( the purple area ) is large, and as we move up towards 75-100 the reverse occurs as our risk increases ( red ) and reward decreases ( purple). So what is the risk reward profile when we sell a binary bet?

Binary Betting - Selling

As you would expect the reverse is true. Remember when you are selling a binary bet you are saying that you think the event will not happen so the risk reward profile is reversed as we would expect. It is always handy to keep this picture in  mind when you are trading in binary betting, as it is easy to get confused with a buy and sell order when you are first  starting.

OK, finally I just want to round up some of the other issues surrounding binary betting, so that you have a complete picture before you start trading.

Binary betting  - next page