Which Forex Managed Account Is Best For You
May 27th, 2009
Forex managed accounts present an attractive opportunity for people who want to make money from the lucrative currency trading markets but cannot or do not want to learn to trade for themselves. You do not have to do the trading yourself if you have a managed account. You will entrust your fund to the management company and they will act on your behalf.
There are two basic types of forex managed accounts.
1. Standard Managed Forex Accounts
This account type will place your money into an account in your name, and a manager will be able to trade with the funds in it. You will be able to always view your account, see how much is there, and how it is doing. It will remain your money.
You have to accept the risk that even a skilled account manager cannot predict the markets 100% and you may have to take some losses. The broker will need to cover their fees and make you a profit.
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2. Managed Pooled Forex Accounts
You should know that there is a risk of fraud when dealing with pooled accounts. Here, your money goes into a pool held by the account manager. A share of declared profits is paid to you.
The theory behind pooled accounts is that your profit and loss will be spread evenly and results more stable then in with a standard account. The problem is that you can never truly know what is going on, and there could be bad people behind that management company who are stealing your money.
It is a sure sign of trouble when an account manager guarantees a certain percentage of return in a pooled fund account. There are no guarantees with forex trading and any company that makes promises of a 10% return or whatever should be treated with extreme caution.
There are well run pooled accounts, and these will carry with them the benefit of more stability than standard forex managed accounts. Be sure to always research pooled account offers thouroughly.
Be sure to shop around regardless of which type of account you choose. Move on to the next if a manager insists that you sign up with a specific broker. That usually means that they get a commission on all your trades, so they have an incentive to make a lot of small trades even if that is not the most profitable strategy, simply to increase the broker’s earnings from the spread and their own commission rakeoff. They may even work their commission on a different basis, but you probably are not getting the best broker. It is wise to choose a company that allows you to select your broker.
It would also be wise to look into automated forex trading software. Automated forex trading robots can take the emotion out of forex trading and increase your chance at success.
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