Managed binary options accounts promise to make you money while you sleep, but the system is flawed. Happy. There are three alternatives that offer a better service to merchants while keeping more control in your hands. This article presents these alternatives, their pros and cons.
In detail you will learn:
- Why not managed accounts?
- Alternative # 1: Signals
- Alternative # 2: Robots
- Alternative # 3: Social Trade
With this information, you can choose the right form of automated trading in binary options.
Why not managed accounts?
Managed binary accounts promise that an account manager will take care of your money in the same way that an investment fund manager would if you invested in a stock market fund. Unfortunately, there are many problems with this concept:
- Some brokers use managed accounts to scam you. They freeze your money and argue that the account manager needs full control, but that everything will eventually be lost – allegedly lost in a series of bad luck.
- Your account manager is paid by your broker and your broker earns money if you lose money.
- Because you trade so many binary options trades, even small fees can make your trade useless.
- It is often difficult to determine whether your account manager is a true professional and knows what they are doing.
As this list of problems indicates, using a managed account is risky. There are many unknowns, especially for newcomers. Someone who has never traded binary options before may find it difficult to judge whether their account manager is a seasoned professional or a complete beginner. These services often claim to be ideal for beginners – the opposite is true.
The idea behind managed accounts is attractive nonetheless. Hire someone to trade for you and earn more money and save time. If you want to pursue this idea without acquiring a managed account, there are a few alternatives for you.
Let’s look at the three most popular options:
Alternative # 1: Signals
Signals are 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 the instructions; If you don’t like it, you simply don’t do anything.
Most signals come as text messages on your phone or as email. A typical signal might read:
DOW JONES, LONG, 2 HOURS
When to trade
This signal tells you to invest in rising prices for the Dow Jones and use a 2-hour expiration. Signals are simple to execute and easy to understand, which is why they are so popular with traders.
Most signal providers charge $99 per month for their subscription. If their signals are good, it is definitely worth the money. Good signals can easily earn you more than $100 per month even if you have little money.
Good signal providers can win about 70 percent of your trades, which is easy enough to earn your money with binary options. Since almost all providers create their signals for high / low options, you need to win at least 60 percent of your trades to make a profit. Anything above that value, and you’re making money.
Signal providers use two ways to create signals:
- Automatic computer programs. Some signal providers use computer programs that monitor the market and automatically create signals when the current market environment meets certain conditions. Such trading strategies are standard with short-term investments and can be very profitable.
- Human traffickers send recommendations. Some signal providers use flesh and blood traders who monitor the market and send them recommendations. The profitability of these systems depends on the quality of the traders, which means that it can be quite good if you find a signal provider that employs qualified professionals.
Some signal providers also try to scam you. It gives random signals and hopes that you will stick 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 who honestly try to win your trades offer you the chance 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, stop the service at any time and get all your money back. You may never sign up with a signal provider that denies you this test phase.
Compared to managed accounts, signals offer the advantage that you have full control of your account. You can recognize problems early and decide whether to trade each signal.
The downside of signals is that you have to stay involved in the trading process. You must be available and able to respond quickly when you receive a signal. Depending on your job and your daily schedule, this may not be possible.
Alternative # 2: Robots
Robots take 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 a robot finds an opportunity, it automatically invests on your behalf.
The way robots create signals is similar to that of signal providers. Some use automated computer programs; some use real traders.
To automatically execute the signals, your robot needs a connection to your trading account. This means you are sharing your login information and access to your money with another company. Some traders frown on such a process and instead stick to signals, which is a legitimate decision. However, if you feel comfortable with a robot provider, you can also decide to take this step.
The fact that your robot must link to your account also limits the available combinations of robots and brokers. You can always ask the customer service of a broker if they can connect their robot to your broker, but sometimes it can be impossible due to technical reasons.
Choose your own broker
Some robots also use a list of recommended brokers that work best with the robot. This listing is more often than not a way for the robot provider to make money. The broker gets a commission when they deliver a client to the broker, and they use this convenient place to indicate that there is a technical necessity why you should leave your current account and get a new one. Be careful of these types of robots.
The advantage of robots is that you can completely outsource your trading process. This means you can minimize mistakes and leave the trading to the best professionals you can find.
Compared to a managed account, robots offer the advantage of not being paid by your broker, thus resolving the conflict of interest of an account manager employed by a broker who benefits when you lose money. Your robot provider earns money when you earn money and continue to subscribe to their services – which is a much more customer-friendly business model.
Monitor closely
The downside of robots is that you give up complete control over your account. Although your robot can’t steal your money, it can be bad enough that you lose everything. Unless you regularly monitor your account and stop a bad robot before it destroys you, you are taking a huge risk.
In any case, you should check your robot thoroughly before signing
Alternative # 3: Social commerce
The third alternative to managed accounts is social trading. Social trading allows you to copy the trades of another trader to your account just like you.
To decide which trader to follow, you will get a list of all available traders and their winning percentage. You will now see that Trader Dave has won 80 percent of his trades in the past, and you can choose whether he will automatically copy his future trades into your account.
Most brokers also display the number of trades a trader has made in the past month, or the amount of money they have invested. Choose a trader who has made many trades. Otherwise, you run the risk of following someone who has only made a handful of trades, meaning that the winning percentage of such a small sample says nothing about the ability of the trader.
Copy dealers
Usually, binary options brokers allow you to adjust the amount of money you invest in each trade. This makes sense because the traders you follow are very successful and invest a lot of money. For new traders, it is impossible to mirror the amount of money people invest. By allowing you to determine how much you want to invest, your broker enables you to perform effective money management.
Furthermore, 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 the trader once they lose a number of trades or a specific amount.
These tools increase your potential to protect your money. Even if a trader has won 80 percent of their trades in the past, they may lose 80 percent of their trades in the future. If you use social trading long enough, you will eventually follow a trader who comes off a hot streak and goes straight into a losing streak. To survive such events, functions that allow you to effectively protect your money are excellent tools.
Compared to managed accounts, social trading is an improvement.
- You always get the latest statistics about the trader investing on your behalf,
- You can manage your money yourself, and
- You get effective fail-safe tools.
These tools help minimize the downside and maximize the downside of automated trading.
Managed Accounts Overview
There are legitimate alternatives to managed binary options accounts. These alternatives target different types of customers with different objectives. The main alternatives you need to know are:
- Signals,
- Robots, and
- Social trading.
Use signals if you want to keep complete control over what trades you take. Choose robots to completely outsource your trading to someone who has nothing to do with your broker. And use a social trade to use a mix of automation and control.