What Are Managed Forex Accounts?
Many people consider managed forex accounts as a means of trading. One of the reasons for this is the limited amount of work that you would have to do to use them. All of the trading is done for you with these account and you simply have to provide the capital. Of course, this type of trading account is not ideal for everyone and you need to determine if they are right for you. It is important that you also look at who the manager of your account is and what they are going to do.
The Types of Management Forex Accounts Available
There are two types of managed forex accounts that you should look into:
- The one account type is individual accounts. With these accounts the manager will handle each account separately and devise a trading plan customized to the decisions of the investor. This means that all the profits made from the investment goes directly to the investor and is not shared with anyone else.
- Pooled funds are the second account type. With these accounts the investment amount is placed in a mutual fund with the investment from other people. The profit this amount makes is then shared among all the investors. The division is based on the risk tolerance of the investor so a trader looking for high profits will invest in a pooled account with a high risk to reward ratio. Before you invest in a pooled account you must read the fund prospectus so you understand exactly what you are getting into.
Assess the Account Manager
Before you sign up to a managed forex account you have to assess the account manager and the service you are using. There are a few ways that this can be done:
- The philosophy of the manager. As the manager is going to do all the trading for you it is important that you understand their trading philosophy. This philosophy affects the way they trade and the potential profits you can make.
- Will you get an explanation if something goes wrong? You have to find out if the service will explain to you why a trade has gone wrong and what is being done to remedy the situation. As it is your money on the line you should be able to get an explanation.
- Look at the performance history of the service and manager. The best evidence of how well this account is going to work is by looking at the past performances of the manager. You can also look at reviews of the service to see how other people have fared.
The Benefits and Drawbacks
There are a number of benefits and drawbacks that come with this kind of account:
- The main benefit for this account is the fact that a professional is handling the actual trading. If you want to diversify your trading portfolio you do not have to spend all your time watching the market. The other benefit for this account is that you do not have to do very much. If you do not have time to watch the market this is the best account for you.
- The drawbacks for this account include the capital amount needed. The minimum amount with many brokers is $2000 for a pooled account and $10,000 for an individual account.