Managed accounts for binary options promise to make you money while you sleep, but the system is flawed. Fortunately. There are three alternatives that offer better service to traders while keeping more control in your hands. This article presents the alternatives, their advantages and disadvantages.
Specifically, you will learn:
- Why not manage an account?
- Option 1: Signal
- Option 2: Robots
- Option 3: Social trading
With this information, you will be able to choose the right form of automated binary options trading for you.
Why not manage an account?
Managed binary accounts promise that the account manager will take care of your money the same way a mutual fund manager will when you invest in a stock market fund. Unfortunately, there are many problems with this concept:
- Some brokers use managed accounts to “scam” you. They freeze your funds, arguing that the account manager needs full control, but in the end everything is gone – supposedly lost in a series of unlucky transactions.
- Your account manager is paid by your broker and your broker makes money when you lose money.
Because you do a lot of trading with binary options, even small fees can make your trades unprofitable. - It is often difficult to judge whether your account manager is a true professional and knows what they are doing.
As this list of issues shows, using a managed account is risky. There are a lot of unknowns, especially for newbies. A person who has never traded binary options before may find it difficult to judge whether their account manager is an experienced professional or a complete novice. These services often claim that they are ideal for beginners – the opposite is true.
However, the idea behind managed accounts is fascinating. Hire someone to trade for you and make more money and save time. If you want to pursue this idea without a managed account, there are a few alternatives for you.
Consider the three most popular options:
Option 1: Signal
Signals is based on a simple principle: a professional trader or a professional trading program tells you how to trade, but you have the final say. If you like a signal, you follow its instructions; If you don’t like it, you just do nothing.
Most signals come as a text message on your phone or as an email. A typical signal can read:
DOW JONES, LONG, 2 HOURS
When trading
This signal tells you to invest on the upside for the Dow Jones and use 2 hour expiry. Signals are easy to implement and understand, which is why they are so popular with traders.
Most signal providers charge $99 a month for their subscription. If their signals are good, they are definitely worth the money – good signals can easily earn you over $100 per month, even if you only have little money.
Good signal providers can make you around 70 percent of your trades, which is easy enough to make money with binary options. Since almost all providers generate their signals for high/low options, you must win at least 60 percent of your trades to make a profit. Everything above that value, and you make money.
Signal providers use two ways of generating signals:
- Automated computer programs.Some signal providers use computer programs that monitor the market and generate signals automatically when the current market environment meets certain conditions. Such a trading strategy is standard with short-term investments and can yield high returns.
- Traders send ants. Some signal providers use flesh-and-blood traders who monitor the market and send you recommendations. The profitability of these systems depends on the quality of the traders, which means they can be quite good if you find a signal provider that employs qualified professionals.
Some signal providers are also trying to scam you. They offer random signals and hope that you stay with them long enough to get at least some of your money.
Do your research
Fortunately, you can recognize reliable signal providers by their money-back guarantee. All signal providers honestly try to win your trade giving you the opportunity to test their signals risk-free. Usually, this test comes in the form of a 60-day money-back guarantee, where you can test the signals for two months, exit the service at any time, and get your full money back . Never sign up with a signal provider that denies you this test period.
Compared to a managed account, signals offer the advantage that you still have full control over your account. You can spot the problem early and decide whether to trade each signal or not.
The downside of signals is that you have to be involved in the trading process. You must be available and able to react quickly when you receive a signal. Depending on your work and daily schedule, this may not be possible.
Option 2: Robots
Robot takes the idea of trading signals one step further. Just like signals, they monitor the market and look for profitable trading opportunities. The difference is that when the robot finds an opportunity, it automatically invests on your behalf.
The ways in which robots generate signals are similar to signal providers. Some use automated computer programs; some use real traders.
To automatically execute its signals, your robot needs to connect to your trading account. This means sharing your login information and access to your funds with another company. Some traders frown upon such a process and instead of staying with the signals, it is a legitimate decision. However, if you are comfortable with the robot supplier, you may also decide to take this step.
The fact that your robot has to connect to your account also limits the available combinations of robot and broker. You can always ask your broker’s customer support if they can connect their robot to your broker, but sometimes this may not be possible due to technical reasons.
Choose your own broker
Some robots also use a list of recommended brokers that work best with the robot. More often than not, this listing is a robot vendor’s way of making money. Brokers get a commission when they deliver clients to the broker and they use this convenient place to suggest that there is some technical need why you should exit your current account and get one. new account. Be careful with the types of robots provided.
The advantage of robots is that you can completely outsource your trading process. That means you can minimize mistakes and leave your trades to the best professionals you can find.
Compared to a managed account, the robot offers the advantage of not being paid by your broker, thereby resolving the conflict of interest of an account manager hired by a broker that benefits when you lose money . Your robot provider earns as you earn and keep subscribing to their services – it’s a much more customer-friendly business model.
Watch carefully
The downside of robots is that you give up complete control of your account. While your robot won’t be able to steal your money, it can trade badly enough for you to lose everything. Unless you regularly monitor your account and stop a bad robot before it destroys you, you are at high risk.
In any case, you should check your robot carefully before logging in
Option 3: Social trading
A third alternative to managed accounts is social trading . Social Trading allows you to copy the trades of another trader like yourself to your account.
To decide which traders to follow, you have a list of all available traders and their winning percentages. You will now trade Dave has won 80 percent of your past trades and you can choose to automatically copy your future trades to your account. Most brokers also show the number of trades a trader made in the last month or how much they invested.
Be sure to choose a trader who has made many trades. On the other hand, you run the risk of following someone who makes only a handful of trades, which means that the winning percentage of such a small sample says nothing about the trader’s abilities.
Copy trader
Usually, binary options brokers allow you to adjust the amount that you invest in each trade. This makes sense because the traders you follow are often very successful and invest a lot of money. For new traders, it is not possible to reflect the amount that those people invest. By allowing you to specify the amount you want to invest, your broker allows you to perform effective money management.
Also, most brokers allow you to set a time limit for how long you want to follow a trader and a stop loss limit that automatically stops following a trader once they lose some trades or a specific amount.
These tools further increase your potential to protect your money. Even if a trader has won 80 percent of their trades in the past, they can lose 80 percent of their trades in the future. If you use social trading long enough, you will eventually follow a trader on a hot streak and run right into a losing streak. To survive such events, features that allow you to effectively protect your funds are great tools. Compared to managed accounts, social trading is an improvement.
- You always get the latest statistics on traders who are investing on your behalf,
- You can manage your own money and
- You get effective failsafe tools.
These tools help minimize the downside and maximize the downside of automated trading.
Managed accounts overview
There are legitimate alternatives to binary options managed accounts. These alternatives target different types of customers with different goals. The main alternatives that you should know about are:
- Signal,
- Robots, and
- Social trading.
If you want to keep complete control over the trades you take, use signals. To completely outsource your trading to someone who has nothing to do with your broker, choose a robot. And for a combination of automation and control, use social trading.