The short answer is Yes! But how? I hear you ask. To understand how to get a systematic advantage in tick trading binary options, you must first understand what it means to have a systematic advantage.
Why the house always wins
The house always wins because it has a systematic advantage. The system is structured, rigged if you’d like, so that the house always has better odds of winning than the punter.
Take the casino roulette wheel for example. Ask yourself these questions:
- Are the odds of hitting black or red even?
- If so, do you have a 50% chance of hitting your chosen color?
This is not a trick question but if you haven’t ever thought about it, have a think now. If you need a clue, take a look at the image of the roulette above.
The answer to the first question is Yes. The answer to the second question is No.
Look at the roulette wheel again. Notice the 2 green slots? It is these green slots that give the house the advantage. Let’s do some simple math here to prove the point.
The chance of you hitting your chosen color, either red or black is 18 out of 38 slots, not 36, that’s 47.4%. The remainder of the odds belongs to the house. So the house’s odds are 20 out of 38, that’s the other 52.6%.
Systematic advantage explained
We are talking about long run averages and long run probabilities, reversion towards the mean. If you spin the roulette 10 times, you could get very lucky and have much higher odds of winning than 47.4%. But the house gets to be at the receiving end of the roulette wheel, with loaded odds in its favor. So for every say 100 spins, the house will be up by 5.2% (52.6 – 47.4 = 5.2). Spin the wheel 10,000 times a day or more, you see why the house always wins?
Now that is the systematic advantage. In a nutshell, it is the math, the probability that is structured to give the house an advantage.
Systematic advantage in your favor?
You may be wondering how you could get the systematic advantage in your favor. The way it’s done is for you to structure the math so that YOU have the advantage.
I have to admit it is tricky, it is not easy. But it can be done. They key is in the system. You get to devise your own system, with numbers that work for you.
Get the system set up first that is mathematically loaded in your favor, then execute your trading according to your trading system.
The components in the math
When you tick trade binary options with the BonusTrade app, the typical payout is 90 to 100%, say about 95%. You bet $10, you win about $9.50 if you win. You may think that’s a very good payoff for the risk. Most professional traders would differ on that. Most would expect a better than 1 to 1 payback on their risk capital. But this is what we have to work with, payback of 95% say.
The components to structure your winning expectancy comprise of 2 things, the win rate and the return to risk ratio (payout rate).
The payout rate is a given, there’s not a whole lot you can do about it except to only trade assets with a high (near 100%) payout rate. So that leaves the win rate as the only variable in the math that you have some control over to give you the systematic advantage.
Winning expectancy illustrations
Illustration 1 – 50% win rate, 95% payout
Say your win rate is no better than 50% as a long run average, you risk (bet) $10 with every trade. The payout rate is 95%. What net outcome can you expect after 100 trades?
50 x ($10 x 95%) – 50 x $10
= $475 – $500
For every 100 trades, you can expect to lose $25.
Illustration 2 – 60% win rate, 95% payout
60 x ($10 x 95%) – 40 x $10
= $570 – $400
For every 100 trades, you can expect to win $170.
Illustration 3 – 67% win rate, 96% payout
67 x ($10 x 96%) – 33 x $10
= $643.2 – $330
For every 100 trades, you can expect to win $313.20.
You can see what a difference the numbers make if you can improve your win rate. If you could consistently achieve the win rate in Illustration 3 above, there lies your systematic advantage! Win rate is what you have to work with in your trading system with a systematic advantage.
You should have figured out these big picture numbers before you start trading with real money. What numbers must you achieve to leave you on top in the long run with money in your pocket? Long run average is what this numbers game is all about.
To load odds in your favor to give you a systematic advantage:
- Trade only assets with the top payout rates, as close to 100% as possible. Don’t go below 95% if you can help it.
- Devise trading strategies that will give you better odds of winning than 50/50. It’s not that hard to consistently win 2 out of 3 trades or better (66.7% win rate) if you are a disciplined and a methodical trader.
That said, if you haven’t already downloaded the BonusTrade app, you can practice trading with $10,000 of virtual money right off the bat as soon as you download and install the app. No sign up necessary. There’s no better way to devise and test winning strategies than demo trading.