Should You Trust Binary Options Account Managers? (And Better Alternatives)


Given binary options’ complexity and speculative nature, some investors prefer a more experienced trader to trade for them. This is where accounts managers come in. 

Sadly, these individuals bring more harm than good, particularly in the largely unregulated world of binary options. Learn about this subject in more detail, the risks involved and alternatives to account management.

Key Facts to Know About Binary Options Account Managers

  • Experienced traders who trade binary options for clients often receive a percentage of the profits as compensation.
  • Binary options account management poses risks due to the industry’s lack of regulation, leaving clients vulnerable to potential scams and financial losses.
  • Insufficient oversight and regulation expose clients to fraudulent activities and high-risk trading strategies employed by account managers in the unregulated binary options market.
  • Managed accounts, social trading, and trading signals let investors passively participate in binary options trading while mitigating the risks associated with account management.
  • While passive trading methods provide convenience, investors should carefully assess the performance and track record of traders or signal providers before entrusting their funds, understanding the inherent risks of binary options trading for making informed investment decisions.

What Are Binary Options Account Managers?

An account manager in binary options is a knowledgeable trader who trades binary options on behalf of their clients. These managers usually provide their services as individuals or work with a broker through its own account management system. The clients provide the manager full access to their account, understanding the strategies they will implement and the risks involved.                                                                                     

Managers get compensated in various ways depending on the arrangement and whether they operate individually or not.

Most will opt for a performance fee for every profitable binary option they make, a set percentage of the gains (e.g., 20%). Rebates are common if the manager trades through a broker’s account management platform. Regardless of the outcome, these will be a fraction of the broker’s fee for each position.

Account management is supposed to be a win-win for both parties involved. Traders can earn passively by replicating the performance of a successful trader without actively trading. On the other hand, the managers earn a set percentage of the gains they generate for the clients, which could be additional to the income they make as individual traders.

Account management is much riskier and trickier in binary options. Investors generally steer clear of it.

Reasons to Avoid Binary Options Account Managers

The overarching reason to avoid account managers in binary options is more or better regulation.

Lack of or Poor Regulation

It boils down to the way that this market is structured. Unlike financial assets like stocks traded through a public exchange, we trade binary options ‘over-the-counter.’ This is a decentralized manner of binary options without formal oversight or exchange to ensure fairness and transparency. 

While companies within exchange-based markets have to be regulated and licensed, binary options are different. A lack of regulation makes it much easier for traders to lose their money without the benefit of reporting to a regulatory authority. So, if many binary options brokers aren’t regulated or licensed, this translates to the account managers.

Account managers must be licensed, qualified, and experienced in other derivatives to manage other people’s funds. An unlicensed or unregistered binary options account manager can scam clients by running away with their funds after depositing.

These are the reasons binary options are banned in several countries. Even the nations that can regulate binary options may regard them as fixed-odds betting or gambling. This contrasts regularly traded markets like forex, commodities, and stocks, which receive the treatment of a financial services authority as investments.

All in all, traders have the challenges of dealing with potential scammy managers and brokers.

No Trading Skill Development and Experience

The point of using any account management is that the manager does most of the work. While this is beneficial, it can also make a trader lazy. It’s quite enticing to piggyback on a more successful individual.

Yet, the person entrusting their funds to another person will probably need to develop knowledge of binary options and trading skills. Every binary options trader’s systems vary. Without experience, the passive trader is left to wonder about the prowess of the account manager’s trading strategies.

This is not a problem when the expert trader is winning, but it is when they are failing. Although some traders can profit, it could be due to a high-risk strategy that eventually leads to their accounts being wiped out. Without knowledge and experience, traders who copy others won’t see these risks and understand performance parameters like drawdown, risk-to-reward, trading history, etc.

Generally, successful binary options traders are self-driven and don’t rely on anyone else to make trading decisions.

Alternatives to Account Managers in Binary Options

Account managers in binary options are far less seen than forex and other traded assets. Still, traders can explore the perks of non-active trading in several ways, namely through managed accounts, social trading, and trading signals.

Managed Accounts

Earlier, we spoke of brokers in account management. These are the entities that facilitate managed accounts. These are special types of account brokers provide that include a competent trader and you as the passive investor. The money manager has the same tasks of performing to their best, even with a managed account through a broker.

Another form of managed account may involve monetary contributions from a group of investors. This is called a PAMM (Percentage Allocation Management Module). The aim is to have an account through a broker and attach it to an experienced trader whose positions will be distributed proportionally in a risk-adjusted system.

Another form of managed account may involve monetary contributions from a group of investors. This is called a PAMM (Percentage Allocation Management Module). The aim is to have an account through a broker and attach it to an experienced trader whose positions will be distributed proportionally in a risk-adjusted system. 

For instance, the manager and the trader copying the manager may have different capital. Yet, if the manager opens a position size (say 1% of their account), the PAMM account would adjust the lot size, ensuring the investor’s trade amount is equivalent to 1% of their account. 

This first type of account management seldom uses binary options; instead, it is familiar in forex.

Social Trading

Social trading, or copy trading, is the more common kind of passive trading in binary options. It involves copying experienced traders while sharing information and conversing in a social network. 

Like account managers or PAMM, it’s a method to speculate in binary options without actively trading or having the knowledge to do so. As with PAMM, the trades from the ‘master’ account are mirrored onto the accounts of their followers in a positional risk-adjusted system.

A broker or dedicated third-party platform provides copy trading in binary options. Either will have a list of proven traders offering advanced performance analytics. The copier decides who to follow based on their risk tolerance, goals, deposit amount, etc. However, they can also manage certain settings during the copying process.

The copier must also consider the commission the copied trader charges upon a profitable binary options trade.  Yet, unlike PAMM, investors receive profits relative to their account rather than as a percentage of a large pooled fund.

Trading Signals

Signals don’t necessarily fall under account management. Yet, it’s another passive way to participate in binary options. A signal is a recommendation or alert from another trader or platform to trade certain binary options with set parameters.  

The details typically include the entry price, expiry time, direction, risk/reward, etc. Decent binary options signal providers offer 3-15 signals daily or up to 50-100 weekly. Many claim win rates of up to 85% (or sometimes higher).

The platforms that signals get delivered include email, instant messenger, social media networks (like X/Twitter), or dedicated software for offering signals.

One advantage of binary trading signals compared to social trading and managed accounts is that traders only need to pay a monthly fee instead of a commission fee per profitable trade. Some platforms or brokers can offer free signals if you sign up and deposit a certain amount.

The one obvious downside is that signals are more solitary as they don’t contain the collective aspect of social trading. Finally, many signal providers prefer to show you their long-term performance, which is encouraged with social trading and managed accounts.

Conclusion

Account managers, managed accounts, social trading, and trading signals are the many ways non-traders can take advantage of binary options without lifting a finger. Regardless of the avenue, the financial risk is relatively the same.

Each method also relies on another trader’s performance, which could be better. Non-passive trading could benefit newbies learning the ropes. Yet, the most successful traders have taken the time to learn the craft and make their own trading decisions.

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Most Asked Questions:

Why are binary options risky?

The quick, ‘all or nothing’ structure of binary options makes it highly speculative, given the difficulty of making consistent predictions. Secondly, the payoff is far less than in other markets. Finally, most binary options providers aren’t regulated, making it an environment vulnerable to scams and other financial malpractice.

Can you make a living with binary options?

Due to its speculative nature, online trading of any form requires a more consistent and reliable income. You should always have other income streams because making a living from binary options alone is almost impossible.

How long does it take to learn binary options?

Learning the basics can take a few days. However, like any traded asset, mastery can take several years.

Which is the least riskiest alternative to account managers?

Copy trading on a reputable (preferably regulated) platform or broker offers the least chance of being a victim of scams. Yet, depending on the quality of the copied traders, there is always a chance of losing money.

About the author

Marc Van Sittert
Marc Van Sittert is an experienced Binary Options Trader and coach who is originally from South Africa. He started his career in 2014 by trading old-school Binary Options online. His main focus is on short-term contracts with 60-second trades.

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