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 Requirements
What is the companies minimum balance requirement? Are you realistically able to find the minimum starting balance affordable without having to borrow funds to do it? Remember that any funds for forex trading should be considered as "risk capital" so that any losses of said funds does not adversely effect the economic well being of you or your family. That is only risk what you are prepared to lose. If you are not prepared to lose these funds, leave them in the bank.
Past Performance
Perhaps the overriding consideration when choosing a managed forex provider is their results. Have they been able to achieve consistent long term growth? The key point being consistency. It isn't a lot of help to you if your provider makes 50% one month and then loses it all the following month. You need to look for consistent results across a period of time of at least 2 years. Over a 2 years period you would expect that the trading system they used would have been exposed to a wide range of market conditions and if their results are consistent then you can be reasonable safe in assuming that their trading methodology is sound. Of course the markets being what they are future results can never be guaranteed.
Management 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 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.
Total 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 Methodology 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
Which broker you choose can be critical in determining whether or not your managed forex experience is a profitable and pleasant experience of a complete nightmare. From experience I can say that which broker you choose needs to be uppermost in your considerations. Do your homework on the broker and make sure they can deliver competitive spreads and commissions. - 23309
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 Requirements
What is the companies minimum balance requirement? Are you realistically able to find the minimum starting balance affordable without having to borrow funds to do it? Remember that any funds for forex trading should be considered as "risk capital" so that any losses of said funds does not adversely effect the economic well being of you or your family. That is only risk what you are prepared to lose. If you are not prepared to lose these funds, leave them in the bank.
Past Performance
Perhaps the overriding consideration when choosing a managed forex provider is their results. Have they been able to achieve consistent long term growth? The key point being consistency. It isn't a lot of help to you if your provider makes 50% one month and then loses it all the following month. You need to look for consistent results across a period of time of at least 2 years. Over a 2 years period you would expect that the trading system they used would have been exposed to a wide range of market conditions and if their results are consistent then you can be reasonable safe in assuming that their trading methodology is sound. Of course the markets being what they are future results can never be guaranteed.
Management 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 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.
Total 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 Methodology 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
Which broker you choose can be critical in determining whether or not your managed forex experience is a profitable and pleasant experience of a complete nightmare. From experience I can say that which broker you choose needs to be uppermost in your considerations. Do your homework on the broker and make sure they can deliver competitive spreads and commissions. - 23309
About the Author:
Managed Forex Trader provides information and services to people interested in investing in Forex these can be view at Managed Forex Accounts.
