How to Find a Profitable Managed Forex Account
Investing in any market or asset class is a serious business and requires serious consideration and due diligence. Here are some vitally important points you need to take into account when deciding on where to invest in any managed forex fund.
The Managed Forex Company
The company you invest with is perhaps the most critical factor. The company needs to able to provide a good, honest and responsive level of service. They should be able to provide you with a point of contact and be able to address your questions and concerns swiftly and transparently.
Starting Balance
At the start of the investment process you need to make an honest assessment about just how much risk capital you have to invest in a managed forex account. Do not be tempted to over extend yourself or borrow money to invest. Risk capital by definition is money you can afford to lose without it effecting your lifestyle. Be realistic about how much you can invest and find a suitable managed account provider whose starting capital requirement is compatible with your own. Not always easy but you will need to look.
Historical Performance
There is no doubt that the first thing you usually look for in a managed account provider is their results. It is tempting to look for the highest monthly profit figures you can find and go with them. But like everything in this world if the figures look too good to be true then they probably are. Getting long term sustainable profits simply isn't compatible with getting big monthly returns. No matter what the provider tells you, big returns equals big risk. Making 50% a month and then losing it the next month isn't a sustainable approach to investment eventually the draw down will get you, almost like one of the laws of physics.
Fees and Commissions
Before you invest you also need to make sure you know exactly what the costs are in terms of commissions and fees you have to pay. Typically you will be asked to pay a commission consisting of a percentage of profits gained, anywhere from 15-50 percent of new profits. On top of this percentage it is possible you may have to pay an annual fee based on a percentage of the balance as well as a fee based on turnover or volume. Make sure you have a thorough understanding of what the fees are, how they are applied and whether or not they are based on rewarding actual performance or simply based on the volume of trading. Obviously you want to make sure that the money manager has some incentive for good performance rather than for simply making large numbers of trades, otherwise known in the industry as "churning". I would suggest a performance fee of up to 30% based on achieving new profit highs is reasonable.
Absolute Control of Your Funds
A key consideration when investing in managed forex is to have complete control over your funds at every stage of the process. Always deal directly with a registered and regulated broker who operates in a well recognized jurisdiction. Reputable managed account providers will always offer this type of functionality as well as providing you will an "LPOA", or Limited Power of Attorney", that effectively gives the money manager the power to effect trades on your brokerage account, but not give them any authority to deposit or withdrawal any funds. In other words you have absolute control over your own funds at all times.
Capital in Trade
Choose a well funded provider who has sufficient capital under management to make it viable for a professional trader to actually trade. Smaller funds or money managers simply won't be able to attract the right kind of trading talent if they do not have sufficient capital under management. Whilst this alone isn't sufficient to give any guarantees it is a powerful indicator as to the overall viability of a particular provider.
Trading Style and Money Management
Give some serious consideration to the trading strategy employed by the forex managed account provider. Satisfy yourself that their trading style and their money management is consistent with your own risk tolerance and make sure that the provider does actually trade according to the guidelines they stipulate. Often you will see providers claiming to risk 1% per trade and actually using 10 or 20% risk per trade whilst trying to recover from losses. This is a very dangerous practice so make sure you are aware of the methodology used and that they comply with it.
The Broker
The broker you or your provider chooses is also a critical component in the overall managed account process. Make sure you do your due diligence on the broker in question, and ensure that their spreads and commissions are reasonable and that the broker is able to execute trades and withdrawals in a timely and efficient manner. - 23305
The Managed Forex Company
The company you invest with is perhaps the most critical factor. The company needs to able to provide a good, honest and responsive level of service. They should be able to provide you with a point of contact and be able to address your questions and concerns swiftly and transparently.
Starting Balance
At the start of the investment process you need to make an honest assessment about just how much risk capital you have to invest in a managed forex account. Do not be tempted to over extend yourself or borrow money to invest. Risk capital by definition is money you can afford to lose without it effecting your lifestyle. Be realistic about how much you can invest and find a suitable managed account provider whose starting capital requirement is compatible with your own. Not always easy but you will need to look.
Historical Performance
There is no doubt that the first thing you usually look for in a managed account provider is their results. It is tempting to look for the highest monthly profit figures you can find and go with them. But like everything in this world if the figures look too good to be true then they probably are. Getting long term sustainable profits simply isn't compatible with getting big monthly returns. No matter what the provider tells you, big returns equals big risk. Making 50% a month and then losing it the next month isn't a sustainable approach to investment eventually the draw down will get you, almost like one of the laws of physics.
Fees and Commissions
Before you invest you also need to make sure you know exactly what the costs are in terms of commissions and fees you have to pay. Typically you will be asked to pay a commission consisting of a percentage of profits gained, anywhere from 15-50 percent of new profits. On top of this percentage it is possible you may have to pay an annual fee based on a percentage of the balance as well as a fee based on turnover or volume. Make sure you have a thorough understanding of what the fees are, how they are applied and whether or not they are based on rewarding actual performance or simply based on the volume of trading. Obviously you want to make sure that the money manager has some incentive for good performance rather than for simply making large numbers of trades, otherwise known in the industry as "churning". I would suggest a performance fee of up to 30% based on achieving new profit highs is reasonable.
Absolute Control of Your Funds
A key consideration when investing in managed forex is to have complete control over your funds at every stage of the process. Always deal directly with a registered and regulated broker who operates in a well recognized jurisdiction. Reputable managed account providers will always offer this type of functionality as well as providing you will an "LPOA", or Limited Power of Attorney", that effectively gives the money manager the power to effect trades on your brokerage account, but not give them any authority to deposit or withdrawal any funds. In other words you have absolute control over your own funds at all times.
Capital in Trade
Choose a well funded provider who has sufficient capital under management to make it viable for a professional trader to actually trade. Smaller funds or money managers simply won't be able to attract the right kind of trading talent if they do not have sufficient capital under management. Whilst this alone isn't sufficient to give any guarantees it is a powerful indicator as to the overall viability of a particular provider.
Trading Style and Money Management
Give some serious consideration to the trading strategy employed by the forex managed account provider. Satisfy yourself that their trading style and their money management is consistent with your own risk tolerance and make sure that the provider does actually trade according to the guidelines they stipulate. Often you will see providers claiming to risk 1% per trade and actually using 10 or 20% risk per trade whilst trying to recover from losses. This is a very dangerous practice so make sure you are aware of the methodology used and that they comply with it.
The Broker
The broker you or your provider chooses is also a critical component in the overall managed account process. Make sure you do your due diligence on the broker in question, and ensure that their spreads and commissions are reasonable and that the broker is able to execute trades and withdrawals in a timely and efficient manner. - 23305
About the Author:
For more information regarding Managed Forex Performance. Brendan is also associated with Managed Forex Performance. Managed Forex Trader provides information and services to people interested in investing in Forex this can be viewed at Forex Managed Funds.
posted by Mr. Forex at
4:40 AM
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