What is a Managed Forex Account

forexportfolios Mon Oct 05, 2009 2:26 pm

What is a Managed Forex Account ?

Many people are drawn to the forex market
due to high liquidity, 24 hour trading, low startup costs, and a number
of other attractive reasons. However, some traders are unable to
sufficiently learn or trade currency due to a conflicting full time job
or other obligation. Also, many investors like to supplement their
existing portfolio without having to learn a completely new market.
This is where the “managed forex account” comes in. A
managed forex account is an established live forex account funded by
the investor, and traded by a company or professional. This allows the
investor a reasonable rate of return on an account he does not
necessarily have to trade himself, and the opportunity to be a part of
the largest market in the world.

There are literally hundreds of companies and investment firms that make use of an investor’s money by establishing a managed forex account.
Some of these companies and firms specialize in managed forex accounts,
and spend all of their time and effort strictly in the currency
exchange. This gives the investor confidence their managed forex
account is being traded by a professional currency investor, and gives
them a better chance of a steady monthly (or yearly) percentage of
return. The returns on a managed forex account have been advertised
anywhere from 5% to 20%+ monthly, with a 10% to 40% of the profit as a
monthly (or yearly) fee to the company or firm. Alternatively, many
companies and professionals may take management fees on the managed
forex account even if the account is not in profit for the month.

There are obviously many up sides to a managed forex account. The
investor is able to achieve a steady rate of growth without having to
spend all the necessary time and effort to trade the money himself. The
investing firm or company that provides the managed forex account will
take a small portion of the profit for the month or year, still
assuring that the account is at steady growth. The forex market is a
very liquid market as well, giving the investor a much more flexible
means of withdrawing funds from the managed forex account. Also,
trading currency allows profit potential in both rising and falling
markets, giving the experienced money manager more opportunities to
grow the investor’s account.

Two of the major types of managed forex
accounts are those traded manually, and those traded by an automated
“trading bot”. Trading bots are pieces of software that
automatically trade currency based on a hard coded set of rules. A
coder will write the system and money management rules into a variety
of programming languages to produce software that could provide a more
regulated steady rate of return for the managed forex account than the
manual trader. This gives the ability of the company or professional to
advertise a set rate of monthly (or yearly) growth. Some of the more
traditional companies and individuals alike prefer to have their funds
traded manually, as the human interaction aspect can sometimes yield
smaller drawdowns and larger returns.

As a managed forex account seems like a very lucrative direction to
take in the forex market, some people may still be drawn away from it
for a few select reasons. Usually, many commercial brokers and
investment firms have a minimum for the account to be traded. These
minimums are usually around $10,000, and prove a hefty starting cost to
the average trader. Also, many of these companies can (and usually do)
promise high returns. In spite of these statements, the majority charge
a monthly management fee to your managed forex account. If your monthly
return is less than the standard monthly charge, your managed forex
account will be in the negative even though before the fee, you were
positive. Great care must be taken in selecting your forex investment
firm, as to minimize your losses due to weak months.

Managed forex accounts can be an excellent way to grow a large account,
or provide a steady rate of growth over a long period of time without
the hassles and emotional swings of trading currency yourself. If the
investor has both the capital and a reputable investment firm or
professional, a managed forex account could prove to be a great
investment opportunity.

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