Managed accounts for binary options promise to make you money while you sleep, but the system is flawed. Good luck. There are three alternatives that provide better service to merchants while keeping more control in your hands. This article presents these alternatives, their advantages and disadvantages. In detail, you will learn:
- Why is the account not managed?
- Alternative #1: Signal
- Alternative #2: Robots
- Alternative #3: Social Commerce
With this information, you will be able to choose the form of automated binary trading for you.
Why is the account not managed?
A managed binary account promises that the account manager will look after your money the same way a mutual fund manager would 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 money, arguing that the account manager needs full control, but eventually, it’s all gone – allegedly lost in a series of bad trades.
- Your account manager is paid by your broker and your broker makes money when you lose money.
- Because you make a lot of trades with binary options, even a small fee can make your trade 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 problems shows, using a managed account is risky. There are many unknowns, especially for newcomers. Someone who has never sold binary options before may find it difficult to judge whether their account manager is a seasoned professional or a complete novice.
These services often claim they are suitable for beginners – the opposite is true. However, the idea behind managed accounts is interesting. 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 several alternatives for you. Let’s look at the three most popular options:
Alternative #1: Signal
Signals are based on a simple principle: a professional trader or a professional trading program tells you how to trade, but you have the last word. If you like a signal, you follow its instructions; if you don’t like it, you don’t do anything. Most alerts come as text messages on your phone or as emails. A typical signal can read: DOW JONES, LONG, 2 HOURS
When To Trade This signal tells you to invest in rising prices for the Dow Jones and uses a 2-hour expiration. Signals are easy to implement 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, they are definitely worth the money – good signals can easily make you more than $100 a month, even if you only have a little money. A good signal provider can win you around 70 percent of your trades, which is quite easy to make you money with binary options.
Since almost all providers make their signals for high/low options, you should win at least 60 percent of your trades to make a profit. Anything above that value, and you make money. Signal providers use two ways to create signals:
- Automated 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 you recommendations. The profitability of this system depends on the quality of the trader, which means that they can be very good if you find a signal provider that uses qualified professionals.
Some signal providers also try to scam you. They give random signals and hope you stay with them long enough to get at least some of your money.
Do Your Research
Fortunately, you can recognize a reliable signal provider by their money-back guarantee. All honest signal providers trying to win your trades give you the opportunity to test their signals risk-free. Usually, these tests come in the form of a 60-day money-back guarantee where you can test the signal 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 test phase. Compared to managed accounts, signals offer the advantage that you remain in full control of your account. You can recognize problems early and decide whether to trade every single signal.
The downside of signals is that you have to stay involved in the trading process. You need to be prepared and able to react quickly when you get a signal. Depending on your daily tasks and 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 the robot finds an opportunity, it automatically invests on your behalf.
The ways in which robots make signals are similar to 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 other companies. Some traders frown on such a process and are quite fixed with signals, which is a valid decision. If you feel comfortable with the robot provider, you can also decide to take this step.
The fact that your robot must connect to your account also limits the combinations of robots and brokers available. You can always ask the broker’s customer support whether they can connect their robot to your broker, but sometimes this may be impossible for technical reasons.
Choose Your Own Broker
Some robots also use a list of recommended brokers that work well with the robot. More often than not, this list is a money making robot provider. Brokers get a commission when they refer clients to brokers, and they use this easy place to show that there are some technical requirements why you should get out of your current account and get a new one.
Be careful with the types of robots provided. The advantage of robots is that you can completely outsource your trading process. This means you can minimize mistakes and leave trading to the best professionals you can find. Compared to managed accounts, robots provide the advantage of not being paid by your broker, thereby resolving the conflict of interest of an account manager used by a beneficial broker when you lose money.
Your robot provider makes money when you make money and continue to subscribe to their services – which is a much more customer-friendly business model.
Fast carefully
The downside of robots is that you give up complete control over your account. Even if your robot can’t steal your money, it can trade enough for you to lose everything. Unless you constantly monitor your account and stop the bad bots before they damage you, you are taking a high risk. In any case, you should carefully check your robot before you sign
Alternative #3: Social Commerce
A third alternative to managed accounts is social trading. Social trading allows you to copy the trades of other traders like you into your account. To decide which traders to follow, you will get a list of all available traders and their winning percentage.
You are now trader Dave has won 80 percent of past trades, and you can choose whether to automatically copy his future trades into your account. Most brokers also display the number of trades made by a trader over the last month or the amount of money invested.
Be sure to choose a trader who has made many trades. Otherwise, you risk following someone who only makes a handful of trades, which means that the winning percentage in that small sample says nothing about the trader’s ability.
Copy Merchant
Typically, binary options brokers allow you to adjust the amount of money you invest in every single trade. This makes sense because the traders you follow are often very successful and invest a lot of money. For new traders, it is impossible to reflect the amount of money that people have invested. By allowing you to decide how much you want to invest, your broker allows you to perform 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 a trader when they lose a certain number of trades or a certain amount of money. This tool further increases 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’ve been using social trading long enough, you’ll follow a trader who comes off a hot streak and walks straight into a losing streak. To survive such an event, features that allow you to effectively protect your money are great tools. Compared to managed accounts, social trading is an improvement.
- You always get the latest statistics about the traders who invest on your behalf,
- You can manage your own money, and
- You get a safe security tool.
This tool helps to reduce the downside and maximize the improvement of automated trading.
Managed Account Overview
There are legitimate alternatives to binary managed account options. These alternatives target different types of customers with different goals. The main alternatives you need to know are:
- signals,
- Robots, and
- Social Commerce.
If you want to maintain complete control over the trades you make, use signals. To truly outsource your trading to someone unrelated to your broker, choose a robot. And to use a mix of automation and control, use social trading.