You may have been browsing the internet at some point and you have come across a revolutionary piece of software called the binary options robot.
At first you are quite apprehensive as you have heard a number of stories of scammy software on the Binary Options market. You are also generally cautious as their promises are not in short supply.
However, upon testing the software on a “FREE” demo account you are amazed at the results that you have witnessed.
You decide to pull out your credit card and invest the $250 with the broker. You go to bed hoping that the next day your account will be up by 100%.
You log into your account and you discover that you have not a cent left as the Robot has traded you down and lost all of your money. This is indeed something that has happened to a number of clients as they have used the Binary Options Robot Scam.
What is the Binary Options Robot?
The Binary Options Robot is a piece of automated trading software that is supposed to be able to generate high win rates for the operator on Binary Option Broker platforms.
All the trader would have to do was create an account with a broker and link the broker up to the Binary Option Robot platform.
The trader would then decide on the parameters that they would like to trade on including the trade size and the assets that the Robot should trade.
In fact, this piece of software that was promoted by a well-known trader called Mr Chris Morton. Chris has been followed in the Binary Options community as a trader that has quite a grasp on the industry. It is interesting that he would promote a binary options robot scam.
How Does the Robot Work?
When setting up the Robot, the trader has a selection of three different trading strategies. These include Classic, Martingale and the Fibonacci. These are betting strategies that are used by the Robot.
The Classic trading strategy uses a flat betting strategy where the amount staked is kept constant. The Martingale makes use of a regressive betting strategy. In other words, if you lose a trade the Robot will double the investment amount.
This should already be a red flag of sort. Any trader or software for that matter that uses a strategy like the Martingale one is clearly reckless.
The final strategy is the Fibonacci strategy which makes use of the Fibonacci sequence when creating trades. This is a progressive betting strategy.
The Binary Option Robot also only trades the major forex pairs. These include pairs such as GBP/USD, EUR/USD, AUD/UAD, USD/CHF and USD/JPY.
In terms of how the signals are generated, you can choose from a number of technical indicators which generate the signals. These include the MACD, RSI, Stochastic and CCI.
So far it looks fairly legitimate to the untrained outsider, however the results are indeed far from impressive.
What are the Results?
Most Binary Options traders have the view that for signals to be profitable, the ITM (In The Money) rate should be at least above 70% assuming that the pay-out rate on the shorter dated options is 70%.
With that in mind, when traders see the numbers of 80% + in Binary Option Robot they are immediately impressed. Indeed, there are a number of testimonials and historical records that appear to show this ITM rate.
The trader will then take the opportunity to create a test account in order to witness these results for themselves. Indeed, when run in test mode the Robot was gaining a 80% ITM rate.
This did of course pique our interest. Yet, after many years in the industry we knew that demo accounts are an effective way to dupe people into investing actual funds.
Hence, we created a live account for the purposes of the test. Our observations on the live account was incredibly underwhelming.
We traded a classic trading strategy with $5 per trade. Within the day, the robot traded 43 times. Of these 43 trades, there were 25 wins and 18 losses. This means that the ITM rate was a measly 58%.
This is way below the minimum that is required for most strategies in order to make any money with Binary Option Signals or Robots.
Not wanting to unfairly criticise the Robot, we decided to leave it trading for the next day. In this case our ITM rate had fallen to just below 50% and we had lost almost half of our capital.
What was indeed clear was that something had changed on the Robot that had created a shift in the effectiveness of the trading strategy.
Why is Binary Options Robot a Scam?
Although many traders would be disappointed to find out that the Binary Options Robot did not live up to their expectations, they should have also followed their initial instincts when registering.
Firstly, there is the pure logic behind the offer. If there was some really effective robot that could easily make money for the trader, why is it not the exclusive property of some advanced hedge fund on Wall Street?
Why would the creators offer the system to you for free when they can simply use their robot to make themselves money on a number of different binary option platforms?
Moreover, why would a broker allow this robot to be used on their platform if they knew that the client was going to make large amounts of money? All of the brokers that offered their platform to be used by the Robot are the counterparty to the trades. Hence, the broker would be put out of pocket if these were indeed successful.
Apart from logic, there are a number of other tell-tale signs that the Binary Option Robot is a scam. Firstly as one can see below there are the fake testimonials with the stock photos.
Indeed we are always quite suspicious when we see quite a few photogenic traders all willing to share their top insights into the latest trading software.
Looking more in depth at the FAQs, we see that they will not allow you to link up an account that you currently have to the Robot. Below is the reason that they give.
From a practical and technical standpoint this merely does not make sense. When a automated trading system links up to an API all it needs is the authentication token in order to do so.
If the Robot software really wanted to provide you with the functionality to trade with it then they could merely ask you to obtain that token from your broker.
Indeed, if the brokers wanted developers and traders to freely access their platform via API they would provide for that option. This is something that is practised with great regularity in the Forex industry. In the Binary options industry, brokers such as Binary.com and ETX allow any traders to freely develop applications to trade on their platform.
Yet, with all of the brokers in question on the Binary Option Robot page, none have an API which is free for anyone to access. This can only mean that the Binary Options Robot has exclusive access and is hence colluding with the broker.
This begs the very important question, how does the Binary Options Robot scam make money?
How Does the Robot make Money
The Robot makes money indeed, but not for those traders that are using. It is a very effective affiliate marketing tool used to lure traders onto a broker platform.
The Robot provider will have an affiliate agreement in place with the brokers in question and will get paid for all the clients that get sent there. This is also why the Robot provider did not want clients to use brokerage accounts that they already hold.
Once you have deposited your $250, the broker has your money and the Robot provider has been paid. It is after this stage that your money is rapidly lost and you end up as the only chump.
Are there any Alternatives?
If you are looking for Binary Option Trading Software then there are a few alternatives that have proven themselves to be relatively successful over a long period of time.
It is important to note, however, that no piece of software or algorithm is going to be a panacea and provide you with endless riches. In trading what you put in is what you get out.
The more skilled that the trader becomes with the various signals that are generated from outside advisors, the better he can adapt them to the strategy he uses manually.
Hence, a trader has to know how to use the tools that are presented to him. They are useful in that they provide the trader with a means but they don’t provide the ends. If something sounds too good to be true it is probably a binary options scam.