Managed Forex Account - Avoid Common Mistakes

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 currency markets. A managed forex account may also be ideal 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 is sensible to allocate a portion of your investment capital to a forex managed account.

A managed forex account is basically where you allocate the task of trading your brokerage account to a money manager. The money manager or trader is tasked with generating a profit on the account in exchange for a percentage of the profits in the form of a performance fee. The exact performance fee varies but is typically in the range of 20 to 50% of profits, plus there may be a yearly account fee in the realm of 1 to 2% of the account balance.

Ultimately it is up to the individual to decide how much to invest in a forex managed account, just be aware that trading on margin with high leverage is classified as high risk, and whilst these factors make it possible to start with a relatively modest investment and get high returns they can also work in reverse and cause significant and rapid trading losses. Be mindful of this when it comes to investing in forex.

Risk management is perhaps the most critical factor in fx managed 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 this 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 net 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 forex managed 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.