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Managed accounts for binary options promise to make you money while you sleep, but the system is flawed. There are three alternatives that provide a better service to traders while keeping more control in your hands. This article presents these alternatives, their advantages and disadvantages. With this information, you will be able to pick the right form of automated binary options trading for you.
Managed binary accounts promise that an account manager will take care of your money in the same way a mutual fund manager would when you invest in a stock market fund. Unfortunately, there are many problems with this concept:. 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 might find it difficult to judge whether their account manager is an experienced professional or a complete novice.
These services often claim they are ideal for beginners — the opposite is true. Nonetheless, the idea behind managed accounts is attractive. Hire someone to trade for you and make more money and save time. If you want to pursue this idea without getting a managed account, there are a few alternatives for you. Signals are based on a simple principle: If you like a signal, you follow its instructions; if you do not like it, you simply do nothing.
This signal tells you to invest in rising prices for the Dow Jones and use an expiry of 2 hours. Signals are simple-to-execute and easy-to-understand, which is why they are so popular with traders. Good signal providers can win you around 70 percent of your trades, which is easily enough to make you money with binary options. Everything above that value, and you make money. Some signal providers are also trying to scam you. They provide random signals and hope that you stay with them for long enough to get at least some of your money.
Luckily, you can recognise trustworthy signal providers by their money back guarantee. All signal providers that honestly try to win you trades provide you with a chance to test their signals risk-free. Usually, this test comes in the form of a day money back guarantee where you can test the signals for two months, quit the service at any time, and get all your money back. Never sign up with a signal provider that denies you this testing phase.
Compared to a managed accounts, signals provide the advantage that you remain in full control of your account. You can recognise problems early and decide whether to trade every single signal.
The downside of signals is that you have to remain involved in the trading process. You have to be available and able to quickly react when you get a signal.
Depending on your job and daily schedule, this might impossible. Robots take the idea of trading signals one step further. Just like signals, they monitor the market and search for profitable trading opportunities. The difference is that when a robot finds an opportunity, it automatically invests on your behalf. The ways in which robots create signals are similar to those of signal providers. Some use automated computer programs; some use real-life traders.
To automatically execute its signals, your robot needs a connection to your trading account. This means sharing your login information and access to your money with another company. Some traders frown such a process and rather stay with signals, which is a legitimate decision.
If you feel comfortable with a robot provider, however, you can also decide to take this step. The fact that your robot must connect to your account also limits the available combinations of robots and brokers. Some robots also use a list of recommended brokers that work best with the robot. More often than not, this list is a way of making the robot provider money. The broker gets a commission when they deliver a customer to the broker, and they use this convenient place to suggest that there is some technical necessity why you should quit your current account and get a new one.
Be careful of these types of robot provides. The advantage of robots is that you can completely outsource your trading process. That means you can minimise mistakes and leave the trading to the best professionals you can find.
In comparison to a managed account, robots provide the advantage of not being paid by your broker, thereby resolving the conflict of interest of an account manager who is employed by a broker that benefits when you lose money.
Your robot provider makes money when you make money and keep subscribing to their service — which is a much more customer friendly business model. The downside of robots is that you relinquish complete control of your account.
While your robot will be unable to steal your money, it could trade badly enough for you to lose everything. Unless you regularly monitor your account and stop a bad robot before it ruins you, you take a high risk.
The third alternative to managed accounts is social trading. Social trading allows you to copy the trades of another trader just like you into your account. To decide which trader to follow, you get a list of all available traders and their winning percentage. You will now that trader Dave has won 80 percent of his past trades, and you can choose whether to automatically copy his future trades into your account.
Most brokers also display the number of trades that a trader made over the last month or the amount of money they invested. Make sure to choose a trader that has made many trades. Usually, binary options brokers allow you to adjust the amount of money that you invest in every single trade. This makes sense because those traders that you follow are often highly successful and invest a lot of money. For new traders, it is impossible to mirror the amount of money those people invest. By allowing you to determine how much you want to invest, your broker allows you to execute an effective money management.
Additionally, 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 of money. 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 might lose 80 percent of their trades in the future. If you use social trading long enough, you will eventually follow a trader that is coming of a hot streak and running right into a losing streak.
To survive such events, features that allow you to effectively protect your money are great tools. There are legitimate alternatives to binary options managed accounts. These alternatives target different kinds of customers with different goals. The main alternatives that you should know are:. If you want to keep complete control about which trades you make, use signals. To completely outsource your trading to someone who has nothing to do with your broker, choose robots.
And to use a mix of automation and control, use social trading. Managed Accounts — The Alternatives.