The 2012 presidential election brought more attention than ever to prediction markets. Sites like BetOnMarkets.com and Intrade.com, which let you bet on everything from who will become the next U.S. president to the future price of oil, have been placed in the spotlight. They’ve been given a sense of legitimacy. The industry has actually been around for years. It has given informed bettors an opportunity to profit on their hunches, knowledge, and expertise.
If you’re new to prediction markets and interested in testing the waters, you might be confused about where to start. It can seem daunting for the uninitiated. The good news is that it’s much simpler than it appears. On this page, we’ll strip away the mystery and explain exactly what you’ll see. We’ll begin with a quick overview of how prediction betting works. Then, you’ll learn what to expect when you visit BetOnMarkets.com, Intrade.com, or similar betting sites.
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How Prediction Betting Works: The Basics
The easiest way to understand prediction markets is to look at the most recent presidential election as an example. As you know, Mitt Romney squared off against Barack Obama, and the latter ultimately won the race. But let’s rewind history to a couple of months prior to the vote.
The market at Intrade had Obama with a nearly 70 percent likelihood of winning. If you’re a bettor, that means you would have been expected to pony up 70 cents to back him. If Obama won, you’d receive $1. If Romney had won, you would have lost your wager. But suppose you had wanted to back Romney. You would have been expected to bet 30 cents since he had a 30 percent chance of winning. Had he won, you would have received a $1.
As you probably know, the odds for each candidate shifted back and forth on a near-daily basis as the election loomed closer. How did those fluctuations affect the prediction market? As the odds shifted, so too did the amount you needed to bet in order to back either candidate. The unrealized profit or loss on the underlying contracts also shifted.
How Making A Prediction Bet Differs From Buying Stocks
When you make a prediction bet at sites like BetOnMarkets, you are wagering that a particular outcome will occur within a specified time period. Only two things can happen by the time a given contract expires. The outcome you anticipate will either come true or it won’t.
Think about our earlier presidential election example. Two months before the election, suppose you had wagered that Barack Obama would become the next U.S. president. By the contract’s expiration, that prediction would either have come true or not. Those are the only two possibilities.
As a side note, some sites (BetOnMarkets is one of them) allow you to sell back your contracts. This can be a good option if you want to lock in your profits or limit your losses.
Now, in contrast, think about what happens when you purchase a share of stock. You are making a prediction that the price per share will rise. The difference is that you’re not wagering on a specific outcome for a given event (forecasting a price increase merely addresses the price’s direction). Nor are you betting that a given outcome will occur within a specified time frame.
There are myriad things that can happen with your stock purchase. The price per share might rise 5 percent in a day. It might rise 50 percent in a month. It might stagnate for six months, hovering near the price at which you bought it. Or, it could plummet tomorrow. Not only is the outcome uncertain, but so too is your potential reward. With prediction betting, risk and reward are known in advance.
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What To Expect During Your First Bet
In order to start betting in prediction markets, you need to register an account with one of the sites that offer the contracts you want to trade. For example, suppose you would like to make a prediction bet on the outcome of a particular currency pair. You could create an account at BetOnMarkets, which hosts a wide range of financial contracts. Registering your account should only take two or three minutes.
Next, you need to deposit funds into your account. The banking methods made available to you will depend on the prediction betting site.
Once your initial deposit shows up in your account, access the site’s betting platform and find your preferred currency pair (or stock, index, commodity, etc.). The types of prediction bets you can make will depend on the site. BetOnMarket’s platform offers “rise/fall,” “higher/lower,” “touch/no touch,” and “in/out” contracts. Each one can be selected via tabs.
Once you have chosen the type of contract you want to trade, you’re given a chance to input several variables. For example, suppose you want to make a higher/lower prediction on the EUR/USD. You would choose the “higher/lower” tab on the BetOnMarkets platform, select whether the currency pair will close higher or lower, and choose the target rate. Then, select the contract’s expiration time.
With those details included, you’ll see the price of the trade (the amount you’ll need to bet) on the right side of your screen. You’ll also see your potential return.
At this point, you’re still not locked into the contract. If you don’t like the proposed return, or feel your time and capital are better invested in a different asset, simply abandon the trade. On the other hand, if you’re pleased with the return, click the “Buy This Bet” button on the right side of your screen.
How To Get Started With Prediction Betting
The biggest challenge in getting started is becoming comfortable with the idea of making prediction bets. Most people are actually used to the idea, but in a different context. They make predictions on the outcomes of sporting events, investments, elections, and more on a routine basis. Moreover, they often stake money on their forecasts, whether through a friendly workplace betting pool, their 401(k), or with friends and family members. The point is that prediction betting is similar to what you’re already doing.
As we mentioned previously, you’ll need to create an account at one or more prediction betting sites. We recommend sticking to those that have passed our review process. They’re trustworthy and reliable and offer plenty of features you’ll find valuable. Click here for trusted brokers
Next, after you create your account, make your deposit. Some sites offer welcome bonuses with your first deposit, but realize there are nearly always conditions that apply to them. Get details on bonuses here
Your next step is to find a contract for the asset you want to trade. Choose the specifics as described earlier and once you’re satisfied, commit to the transaction. That’s it. Your profit or loss on the trade is based on the accuracy of your prediction.
It’s also a good idea to go through the betting site’s resources. Some sites, like BetOnMarkets, offer daily trading reports, strategy tips, and training videos to help you get up to speed as quickly as possible. Take advantage of them.
Prediction betting can be a great way to make a profit on your hunches. If you’ve ever had a strong feeling about the outcomes of certain events, now is your opportunity to make money from them. Keep in mind, there is risk involved. It is possible to lose your investment. On the other hand, it is also possible that your predictions will land right on the money.
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