Managed Forex – A Brief Discussion
There are a number of approaches to earn money in the currency markets. You are able to trade an account yourself or you can set up a managed account. By using a managed account means that you will use a robot to make your decisions for you or you’ll hand your funds over to a professional trader to manage your money for you.
Managed Accounts
In a managed forex account, you give your money to a professional investor and that he manages it for you. In exchange, he will take a management fee, that’s usually between 10 and 20 percent of the profits. If you do not know how to trade yourself this could have its advantages as you won’t need to spend endless hours analyzing the markets. The returns on managed accounts could vary widely. Some funds will average 20 percent a year or more, a few will be lucky to generate 10 percent a year, while others will lose money. Most managed accounts seek participants with a minimum of $5,000 to invest. Choose a manager with at least a five-year track record.
Auto Trading
In another form of managed forex called auto trading, an established forex trader links his account with yours using a software program and his trades are automatically placed in your account. Using this service you have to pay each month instead of a percentage of profits. This service is newer and therefore the track records are often only several months old.
Expert Advisers
A forex expert adviser is a set of rules which have been programmed into the MetaTrader 4 software program. It will automatically execute trades in your account 24 / 7. The long-term track record for this type of managed account is not the best.
Hedge Funds
When you have sufficient funds, you can join a forex hedge fund. However, you’ll have to either have an income of $200,000 for the past two years or a net worth of $1 million to do so. This is an investment vehicle only for people who are already fairly wealthy. Like other sorts of managed funds, the fees depend on performance and the industry standard is 20%, although some managers will charge as much as 50 percent.
Risk
As with every investment vehicle that requires you to hand over your money to somebody else, there is a risk that they’ll either lose it or run away with it. When investing in a hedge fund or managed fund, do your due diligence. Forex is a fast-paced market and there’s always a likelihood of loss.
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