Binary options signals are a heated discussion topic in some trading circles. Some swear by them, claiming they are the best way to create wealth with binary options, while others say they are a complete scam. As with most things the truth is somewhere in between, and below we take a look at the advantages and disadvantages of binary options signals.
Binary Options Signals Advantages
- Emotions are taken out of your trading, which avoids problems with over trading or an inability to pull the trigger on a trade.
- Continues to trade for you 24/7 with no missed opportunities. This is true whether you are running binary options signals on your own, or if you receive them from a signal service.
- Can generate more consistent winning trades than manual trading.
- You can program money management right into the signals, and relieve yourself of the need to remain disciplined when you really want to trade more than your money management calls for.
- Binary options signals can identify market patterns that are complex and would be almost impossible for a human to see.
- When automated a signal can be triggered and traded within milliseconds, ensuring no trade will ever be missed.
- The ability to use strategies that might require dozens of simultaneous trades. While these strategies are often very profitable, they are only possible when automated trading signals are used.
Binary Options Signals Disadvantages
- There is little flexibility when using binary options signals. You are often constrained to a single asset, and some signal services require you to use a specific broker.
- Your trading is totally dependent on technical data and signals. This can limit you in that fundamental analysis when combined with technical analysis is often superior in generating winning trades.
- When using signals you will find that they often enter the market at predictable levels, opening you up to the possibility of your trades being hunted by others. This can be very common with institutional investors, who are well known to take advantage of such trades.
- Actual performance could vary wildly from what the historical performance suggests. Oftentimes the historical data comes from back testing, and the results are not able to be replicated in actual market conditions.
- Unusual market conditions can break the trade signals, leading to large losses in a short period of time.
- When signals are provided by a signal service the trader may not have time to act on them if he isn’t able to trade immediately. This is not as much of a problem with automated signals, but slippage can still be a factor that needs to be considered.
- Automated trading signals are still open to errors in programming as well as hardware failures. In addition, data transmission errors can also cause unintended losses when trading with binary options signals.