What Is Forex Managed Accounts
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Managed accounts are an option for people that do not have the time, inclination or expertise to trade forex for themselves. All it means is thay use a professional trader to trade and manage their money for them on their behalf. This is done in the same way that banks and other financial institutions maintain accounts using equites and other financial instruments.
Obviously an understanding of forex exchange instruments and the multitude of options, time frames, currency cross pairs, volatility and a country’s fundamental strength and weekness that affects it’s currency is something one must take into account when trading forex. Not everyone has the expertise or time to learn these things. Professional traders get paid to do just that, understand what drives the market and how to place positions on in a way that won’t wipe you out within days.
How Much to Start With?
It’s not necessary to start with large amounts of capital in the forex market. Forex traders have leverage that hardly any other market can offer. Whilst this can magnify the returns that forex can provide, it is also a double edge sword in that it can also magnify the losses. Most brokers can offer leverage of up to 100:1 and some to 200:1. Obviously, choosing a a managed fund that has sound money management principles and position sizing is one of the most essential factors to consider. Even if one was trading themselves, money management and position sizing is considered one of the most important points to focus on when trading.
There was a time when only traders with larger sums of money could trade the forex. Now, since the dergulation of the forex industry which was once the domain of the large banks and institutional traders, anyone can trade the forex. The internet is also providing a multitude of information that allows anyone to educate themselves in the fundamental workings of the industry. One can utilise the services of the fund manager whilst they educate themselves on the inner workings or develop a strategy that suits their personality or style.
Your Hands Are Not Shaking
Obviously, if you are an inexperienced trader but the lure of large profits is appealing to you, using a managed fund is a smart move. A lot of inexperienced traders become very nervous and scared when trading. They will often do the wrong things, in letting their losses run when they should have got out of a trade or cutting their losers too short when they should have let them run. Second guessing their indicators or decisions to trade. Using a fund manager who is experience in trading and treats it like a business will eliminate a lot of the wrong things to do when trading with live money.
What To Take Into Account
When entering into any sort of managed fund, questions must be asked of one’s self and the broker. How much risk are you prepared to take on is very important. If you are not able to take a large draw down in capital, which can definitely happen in the forex market, then reconsider your decision to trade in this market. You should also ask what are the fees and commissions that will be charged by the fund manager. Some managers will charge a flat percentage fee per year, regardless or return, some will opt for a percentage of any profits that are attained and nothing if there is low or negative returns. The latter is somewhat attractive as it provides more of an incentive for the fund manager to perform. Obviously, under these conditions, the percentage will be higher, but if your account can return 50% plus for the year, which is definitely possible, 10-15% commission isn’t too bad. These are purely theoretically amounts and each manager is completely different.
Money Is Everywhere
And finally, the lure of trading in the forex market is the fact you are participating in the largest market in the world. The market trades 24hrs a day five days a week and amongst every leading financial instution in the world. There are literally opportunities many times a day to profit from the exchange of currency’s.
Due to the enormity of the market, it is very hard to manipulate unlike some other instruments in finance. There is a constant flux of buying and selling of currencies across many countries, through many platforms, from speculators, large hedge funds, companies exchanging currencies for multinational deals and people exchanging currencies for holidays and travel.
So, if you want to participate in the largest, most liquid market in the world, but you don’t want to throw yourself int he deep end of the pool, using the services of a managed forex fund could just be the shot. Obviously, teaching yourself to fish so you can feed yourself for life is an analogy in the trading world that basically means if you can learn to trade yourself, you can make all the money yourself and not have to pay anyone anything. These are all questions that only the individual can answer, but in the meantime, the forex managed funds are there for you while you ponder your decision.
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