7 Essential Tips For Finding A Profitable Forex Managed 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 Company
If you are about to invest a significant sum of money you need to be confident that the company is who they say they are and is in fact a real company, with real people you can talk to on the phone. If you are about to invest $50,000 for example you want to make sure that you can talk to someone about any concerns you have or may have in the future. A company should be able to provide a point of contact to answer these concerns.
Starting Balance
The minimum starting balance for forex managed accounts varies greatly. Obviously this needs to be a consideration when choosing a managed forex account. Many high end forex accounts have a starting balance of $1 million. Find one that suits your budget and start with the minimum and get a feel for their trading and see if you are satisfied with the results.
Results
Perhaps the first thing you are going to look at when considering a managed forex account is their results. People invariably are impressed by big numbers but don't let this fact alone blind you to the down side of impressive looking statistics. Much like physics, where reactions are equal and opposite so are profits. Big profits equal big risks. Look for consistent and sustainable profits, don't base your assessment on 2-3 months worth of performance. The market goes through cycles, sometimes these cycles can last sixth months and deliver unusually high returns. For this reason to be realistic you really need to look at 2 years worth of results. If a trader can only offer you 6 months worth of history it probably isn't enough.
Management Fees and Commissions
You also need to consider what the costs of doing business are to you the investor. How is the money manager being remunerated? Do they have an annual percentage fee, a fee based on trade turnover or do they take a percentage of profit per month or perhaps they even have all 3? These questions can have a profound effect on exactly how much you get to take home at the end of the month. If a trader makes a commission based on trade volume, or the number of lots he trades per month, it is possible they can simply be making money "churning" accounts whilst making little actual profit. This is also associated with "over trading". Many forex managed funds also carry an annual percentage fee based on the account balance. You need to looks for a managed account where the money managers are rewarded for their results, so paying a percentage of new profits on a monthly basis is fair. The exact percentage will usually vary from 15 to 35% of new profits. I would be very reluctant to pay a greater percentage than this.
Absolute Control of Your Funds
Make certain that your provider gives you absolute control of your own funds at all time. The account should be opened in your own name, or that of your chosen company name. All monies should be sent directly to the account of a registered and regulated brokerage house rather than the provider themselves. There should be no exception this. Any bona fide managed forex provider will ensure that you are provided with an "LPOA" or "Limited Power of Attorney" to sign that allows them to only execute trades on the account and nothing more.
Amount of Capital Under Management
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.
Article Source: FxTradingStock.com
About the Author
For more information regarding Managed Forex Reviews. Brendan is also associated with Managed Forex Reviews. Managed Forex Trader provides information and services to people interested in investing in Forex this can be viewed at Forex Managed Funds.
by: Brendan Wilson
Total views: 39
Word Count: 883
Date: Sat, 31 Jul 2010
Publish/Share this article
To use this article on your site click here to get the HTML code
Rating: Not yet rated
Login to vote
Related Articles
Tips On How To Profit In Virtual Stock TradingLet's Choose A Forex Broker.
Some Tips On How To Forex Trade Online To Know
Stay Away From Requotes In Forex.
Helpful tips for Finding the right Forex Trading Program
Forex Currency Trading Software program -- Pick the Proper 1!
Forex Trading Strategies - What To Do When You Loose
Currency exchange Robot Trading Systems - Get the Full Benefit!
