Types of Binary Bet: Up/Down
Binary bets come in a range of different shapes and sizes, all with the common requirement that traders pick a side: yes or no, win or lose. The most basic form of binary bet is know as the ‘up’ bet, and is very closely aligned to the corresponding ‘down’ bet, on which the majority of binary bets will be traded. As a straightforward trading proposition up/down bets seem simple on the face of things, and for the trader with a sharp eye and ability to read market movements, it can be all that’s needed to capitalize on market movements through binary betting.
An up bet carries with it a simple proposition – that the market will close up on its present rate by the end of the day’s trading. Traders take an up bet when they think that the market will rise, factoring in the actual odds of the market rising against the odds offered by the broker.
Because the broker fixes the odds relative to the current price of the market, the odds will constantly fluctuate throughout the day, so it’s better to wait for a depression in market rates to take your position, assuming you still forecast it to grow over the course of the trading day. In some cases, it is possible to close out your position before it is settled at the end of the day, thus locking in a profit smaller than that which would otherwise be available but guaranteed at some point before the end of the day.
Similarly, a ‘down’ bet focuses on the proposition that the relevant market or asset will move down on the day from the point at which you open your position. Effectively shorting the market, a down bet relies on the market falling from the point at which you entered, and in doing so will settle at 0 – even if the market falls by only a fraction of a point.
Up and down bets with binaries form the bulk of the everyday trade in binaries through the various online brokers. While they represent the most straightforward form of binaries, that’s not to say they are any easier to implement, and for the trader that manages to leverage up and down bets to his advantage, the rewards can be substantial.