Foreign Exchange Managed Accounts – Techniques For Avoiding The Pitfalls

If you do not have the skills or time to actively trade you can still benefit from the potentially lucrative forex market. A forex managed account provides you access to be able to trade forex without having to watch the markets night and day. A reliable money manager can trade your account and help then add more diversity to your investment portfolio, with no added exposure of adding to investments that already may have too much exposure to the equities markets.

Managed forex is the name applied to accounts which are traded for you by a seasoned trader, usually referred to as the money manager. The money manager accounts for the trading the accounts of several account holders and their primary focus is to trade the accounts according to a particular rule set, and applying risk management and money management in compliance with that rule set.

Take into account that you need to be realistic about the amount of capital you allocate to fx trading. It’s easy to be seduced by the thought of double digit returns per month and invest all you have in it. It’s fair to suggest that of your total capital a reasonable percentage to classify as risk capital is 10 to 25%. Do not be greedy and bet the farm, start with the minimum capital requirement and if it proves to be a profitable and well run managed account program invest what you could reasonably afford.

Trading on margin with high leverage is classified as high-risk, however, managed correctly the risk is manageable. With the use of strategically placed stop losses and strict money management it’s possible to have effective risk management with forex. Certainly a strict and high end of trading discipline is essential if this risk management is to be effective, this is why it’s best to invest with a managed account program run by a team of professionals.

When setting up a forex managed account it’s very wise to keep control of your funds at every step of the process. By starting an account directly with a registered broker in a regulated environment you have significantly reduced the risk of any funds being misappropriated by an unscrupulous company or money manager.

The combination of high leverage and virtually unlimited liquidity is something unique to the currency market. This along with the fact that the market is open 24 hours 5 days weekly implies that positions can be liquidated virtually at any time.

Invariably any reputable managed forex provider will give you an LPOA or Limited Power of Attorney Form to sign. This is simply a form that allows the money manager access to trade your account with a broker, whilst not actually allowing them any access to withdrawal funds. Thus giving you significant protection from any potential abuse. Be extremely wary if this facility is not offered to you as an investor.

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