7 Tips For Choosing a Profitable Managed Forex Account
Before investing in a Forex Managed Account there are a number of vital factors to consider in order to make sure that your experience is a profitable one. Failing to grasp any one of these fundamentals could put you on the road to a costly and unpleasant experience.
The Company
Obviously before you send your hard earned money off to a foreign land it is essential that you know exactly who it is you are dealing with, where are they based and who is your point of contact at the business in question. They need to be able to make themselves available to you at short notice to answer any questions or concerns you might have.
Starting Balance 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.
Past Performance
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.
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.
Control of 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 Strategy
Make certain that you are well versed in the methodology used by your forex managed account provider and ensure that you are comfortable with the way they trade and that it is compatible with your risk profile. Only you know what your risk tolerance is, so only you can answer the question of what constitutes too many losses or too much draw down.
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. - 23200
The Company
Obviously before you send your hard earned money off to a foreign land it is essential that you know exactly who it is you are dealing with, where are they based and who is your point of contact at the business in question. They need to be able to make themselves available to you at short notice to answer any questions or concerns you might have.
Starting Balance 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.
Past Performance
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.
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.
Control of 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 Strategy
Make certain that you are well versed in the methodology used by your forex managed account provider and ensure that you are comfortable with the way they trade and that it is compatible with your risk profile. Only you know what your risk tolerance is, so only you can answer the question of what constitutes too many losses or too much draw down.
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. - 23200
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 X - Men @ 8:14 AM
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