Increase Your Fixed Odds Gains Through Using Compounding

Using compounding is central to profiting from any investment strategy. It is particularly powerful when used in conjunction with fixed odds trading.  

If you have not heard of compounding before the concept is actually quite simple to understand and is often referred to as the 'snowball' effect as it literally allows your returns to grow rapidly over time.

It works by assuming a return is generated on both your original capital and also the return you have received over time. So for example, in year one you earn a return on your capital, in year two you earn a return on both your original capital and the return from the previous year. By the third year you earn a return on your original capital again and the profit you earned in years one and two.

How does this work in relation to Fixed Odds?

From the brief illustration above, you can see compounding working. However compounding does not just work with bank deposits or other investments. It can be applied to any form of investment where the return is applied to the investment. Returns can compound on an annual, quarterly or even monthly basis. The shorter the time period for the compounding basis, the better the returns you will receive as an investor. This is where financial fixed odds particularly benefits.

As we are able to achieve our returns in days with Fixed Odds trades, it allows us to rapidly accumulate capital. Furthermore because we have compounding on our side, we do not need to chase the high risk trades to make substantial profitable gains. Instead a number of small gains can quickly be compounded into much larger gains. This allows for higher value trading positions to be taken which also quickly accelerates the returns that are made.

How Can I Use This On My Fixed Odds Account

As with any form of investment it is important that you have a good strategy which will allow you to pick out successful trades. Once you ahve a reliable strategy it is however easy to use compounding to increase your returns.

Let us assume that we achieve a 10% return on our £1000 bank at the end of month one. We are using 10% staking rules so during the first month we were staking to win £100 on each trade. So at the start of month two we have a bank of £1100.

So using a 10% staking rule would now allow us to use £110 on each trade (10% of £1100).

By the end of month two if you again make a 10% return your capital would now stand at £1210. So for month three using 10% of capital again would now see £120 used on each outcome. And so it goes on. At each month you determine the proportion of risk capital to place on your fixed odds systems in line with the balance on your account.

Remember you are never actually risking any greater proportion of your trading capital that you have set aside for trading. However due to compounding the amount you can place on each contract becomes bigger and so the profits grow.