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.
Initial Capital Requirements
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
The commissions and performance fees for forex managed account providers varies greatly. There are basically 3 main areas where providers receive payment. Many providers charge an annual account management fee which ranges from .1% to 5%. This fee is usually charged according to the actually account balance. This may be the only fee charged but more typically it is combined with a monthly performance fee or a fee charged on the trade volume. Performance fees vary from 15 to 40 % of new monthly profits. Make sure that you thoroughly understand the type and amount of fees your provider charges and be wary of providers that charge fees on accounts even when no new profits are achieved. Also be wary of "churning" or over trading where a provider gets a rebate per trade simply by placing a trade, this form of compensation is open to abuse.
Control Of Your Own 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.
Total Capital Under Management
By knowing exactly how much a particular money manager has in trade it gives you a fairly reasonable indication as to whether they have a well established business or not. If a fund manager has over $50 million in trade it is a good indication that they have been able to establish a level of trust with some astute investors. Of course this in itself gives no absolute guarantees it does indicate that the company is a serious investment company.
Trading Methodology and Money Management
Money managers can use any number of trading methodologies or strategies. Whatever their trading style you need to make sure that you are comfortable with it and it suits your risk profile. Long periods of holding negative trades and periods of draw down can make investors very nervous, so get a good idea of their methodology before you invest. If you are not completely comfortable with their trading style do not invest with them.
The Broker
Don't overlook the role that the broker plays in the overall managed account process. A good, responsive broker can make a huge difference to whether or not you have a favorable outcome from your managed forex experience. Do some due diligence on the broker recommended by your provider and make sure that they are able to offer competitive spreads and fees and also give you fast and accurate trade execution and speedy deposits and withdrawals. If they take weeks to process transactions this can end up costing you a lot in terms of time and lost trading opportunities. - 23210
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.
Initial Capital Requirements
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
The commissions and performance fees for forex managed account providers varies greatly. There are basically 3 main areas where providers receive payment. Many providers charge an annual account management fee which ranges from .1% to 5%. This fee is usually charged according to the actually account balance. This may be the only fee charged but more typically it is combined with a monthly performance fee or a fee charged on the trade volume. Performance fees vary from 15 to 40 % of new monthly profits. Make sure that you thoroughly understand the type and amount of fees your provider charges and be wary of providers that charge fees on accounts even when no new profits are achieved. Also be wary of "churning" or over trading where a provider gets a rebate per trade simply by placing a trade, this form of compensation is open to abuse.
Control Of Your Own 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.
Total Capital Under Management
By knowing exactly how much a particular money manager has in trade it gives you a fairly reasonable indication as to whether they have a well established business or not. If a fund manager has over $50 million in trade it is a good indication that they have been able to establish a level of trust with some astute investors. Of course this in itself gives no absolute guarantees it does indicate that the company is a serious investment company.
Trading Methodology and Money Management
Money managers can use any number of trading methodologies or strategies. Whatever their trading style you need to make sure that you are comfortable with it and it suits your risk profile. Long periods of holding negative trades and periods of draw down can make investors very nervous, so get a good idea of their methodology before you invest. If you are not completely comfortable with their trading style do not invest with them.
The Broker
Don't overlook the role that the broker plays in the overall managed account process. A good, responsive broker can make a huge difference to whether or not you have a favorable outcome from your managed forex experience. Do some due diligence on the broker recommended by your provider and make sure that they are able to offer competitive spreads and fees and also give you fast and accurate trade execution and speedy deposits and withdrawals. If they take weeks to process transactions this can end up costing you a lot in terms of time and lost trading opportunities. - 23210
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 Managed Forex Accounts.
posted by X - Men @ 4:09 AM
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