Forex Managed Accounts: Avoiding the Pitfalls
A managed forex trading account allows a potential investor who does not otherwise have the necessary time or skills to participate in the potentially lucrative forex market. A managed forex account may also be suitable for the investor who prefers to have his trading account to be managed by a group of professionals. In keeping with the sound philosophy of diversified investments it is well documented that there is no true correlation between the forex and equities markets. It therefore makes sense to allocate a portion of your investment capital to a forex managed account.
Managed Forex is the name applied to accounts that are traded on your behalf by an experienced professional trader, usually referred to as the money manager. The money manager is responsible for the trading the accounts of many account holders and their primary focus is to trade the accounts according to a specific rule set, and applying risk management and money management in compliance with that rule set.
Keep in mind that you need to be realistic about the amount of capital you allocate to forex trading. It is easy to be seduced by the thought of double digit returns per month and invest everything you have in it. It is fair to suggest that of your total capital a reasonable percentage to classify as risk capital is 10 to 25%. Don't be greedy and bet the farm, start with the minimum capital requirement and if it proves to be a profitable and well run managed account program invest what you can reasonably afford.
Risk management is perhaps the most critical factor in managed forex trading. A professionally run program will have specific risk management measures in place to ensure that the risk of catastrophic trading losses is minimized, as far as is possible in this volatile market. Capital preservation should be the number one priority above all else.
Some forex investment funds require funds be sent directly to their own bank accounts, while other Forex Managed Account providers allow you to invest directly with their broker. The second scenario where you invest directly with the broker gives you far more control over your own funds and is preferable for that reason. The reason is so you can deposit or withdraw your funds as well as revoke the right of the money manager to trade your account.
Often you will see claims on the internet about potential returns that might use terms such as 50% a month or more. Whilst these types of returns are possible it is highly unlikely that they are sustainable. Personally I have not witnessed anyone achieve figures such as thing for a prolonged period of time. Much like the laws of physics where forces are equal and opposite, risk and reward are much the same. You simply can't get large returns without taking large risks. The markets invariably punish those that ignore this rule.
Any reputable managed forex provider will provide you with the brokers LPOA or Limited Power Of Attorney. This is simply an agreement that allows the money manager to trade your Managed Forex account without giving them access to withdrawal or otherwise handle funds. This gives you significant protection from any abuse and also allows you to revoke the LPOA at any time should you deem it necessary to do so. - 23159
Managed Forex is the name applied to accounts that are traded on your behalf by an experienced professional trader, usually referred to as the money manager. The money manager is responsible for the trading the accounts of many account holders and their primary focus is to trade the accounts according to a specific rule set, and applying risk management and money management in compliance with that rule set.
Keep in mind that you need to be realistic about the amount of capital you allocate to forex trading. It is easy to be seduced by the thought of double digit returns per month and invest everything you have in it. It is fair to suggest that of your total capital a reasonable percentage to classify as risk capital is 10 to 25%. Don't be greedy and bet the farm, start with the minimum capital requirement and if it proves to be a profitable and well run managed account program invest what you can reasonably afford.
Risk management is perhaps the most critical factor in managed forex trading. A professionally run program will have specific risk management measures in place to ensure that the risk of catastrophic trading losses is minimized, as far as is possible in this volatile market. Capital preservation should be the number one priority above all else.
Some forex investment funds require funds be sent directly to their own bank accounts, while other Forex Managed Account providers allow you to invest directly with their broker. The second scenario where you invest directly with the broker gives you far more control over your own funds and is preferable for that reason. The reason is so you can deposit or withdraw your funds as well as revoke the right of the money manager to trade your account.
Often you will see claims on the internet about potential returns that might use terms such as 50% a month or more. Whilst these types of returns are possible it is highly unlikely that they are sustainable. Personally I have not witnessed anyone achieve figures such as thing for a prolonged period of time. Much like the laws of physics where forces are equal and opposite, risk and reward are much the same. You simply can't get large returns without taking large risks. The markets invariably punish those that ignore this rule.
Any reputable managed forex provider will provide you with the brokers LPOA or Limited Power Of Attorney. This is simply an agreement that allows the money manager to trade your Managed Forex account without giving them access to withdrawal or otherwise handle funds. This gives you significant protection from any abuse and also allows you to revoke the LPOA at any time should you deem it necessary to do so. - 23159
About the Author:
For more information regarding Managed Forex Accounts take a look at Forex Managed Account Service. Brendan is also associated with Managed Forex Performance.
posted by X - Men @ 1:15 AM
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