Category: 

What is Financial Betting?

Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 29 January 2020
  • Copyright Protected:
    2003-2020
    Conjecture Corporation
  • Print this Article

Financial betting is an investment strategy that involves wagering on the movement of a price associated with a specific financial instrument within an specified period of time. Typically, this type of wagering utilizes the current price associated with the instrument as the base price, with the wagering then focusing on what changes to that price take place in the future. This approach has the potential to pay a handsome return if the price moves in the direction predicted, but can lose a substantial sum if the financial instrument fails to perform as anticipated.

While financial betting and speculation are sometimes considered the same thing, there are subtle differences between the two. Speculation may result in earning at least some gains if the price of the instrument increases at all during the period under consideration. By contrast, financial betting requires that the movement be within a defined range and yield a predetermined return in order for the investor to benefit from the strategy. Essentially, this means that financial betting is a binary option that must either win or lose; there is no room for earning a little versus a lot, or losing a little versus losing a lot.

Ad

As with other forms of betting, financial betting is placed with a bookmaker and must be conducted in accordance with the odds set forth by that bookmaker. In order to successfully execute a bet that ultimately results in a win, it is important to weigh those odds against the projected movement of the market in which the financial instrument is traded. Along with understanding the general market trend, it is also important to ascertain how changes in the market will affect the instrument, as well as account for any ancillary factors that could cause the instrument to perform in a manner that is contrary to the market’s direction.

Financial betting does involve risk. Like most investment approaches, failure to accurately predict future movements will result in a loss rather than any type of gain. The nature of the process may also be somewhat uncomfortable for some investors, since it does not allow much in the way of room for error. For this reason, anyone interested in engaging in financial betting should understand the process thoroughly, research the odds, and make sure they have a solid understanding of what is most likely to occur with the price movement of the financial instrument in question. Due to the risky nature of this approach, more conservative investors would do well to focus on other methods of increasing the value of their investment portfolios.

Ad

Recommended

Discuss this Article

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email