Managed Forex Trading Is A Viable Option For The Busy Investor
Managed forex trading accounts have gained popularity in recent years because of the real convenience and profitability that they present to forex investors. Currency investors who either do not have the time and patience to learn forex trading on their own, or simply do not have the time and skill to trade their own forex accounts are the perfect people to take advantage of managed forex trading.
The extremely busy investor may not have the time to learn the complexities of forex trading, and certainly not enough time to monitor the trades that he would make. But he still believes in the extreme profitability that is possible in trading forex. He wants to take advantage of this lucrative investment option where he can make use of leverage to make huge profits with a relatively small amount of capital or investment. And so he looks for an expert to do the trading for him. This forex expert shall be the one to handle his trading account and hopefully, bring in profits to his managed forex trading.
But not all managed forex trading are legitimate. And not all managed forex trading accounts are profitable. Here are a few tips on how you can avoid losing all your money when investing with a managed forex trading account.
The Types Of Managed Forex Trading Accounts
First thing to know about managed forex trading is that there are two types of accounts: the pooled and the normal managed account.
Pooled managed forex trading accounts are just like mutual funds where the fund manager gets investments from a variety of investors and pools all their money into one account that he invests in forex (if indeed the money is invested at all).
The normal managed forex trading accounts, on the other hand, gives your account the separate identity. It is not pooled with the money of other investors, and all the trades, profits, and losses are directly attributed to your forex account alone. Your account manager trades your account for you when you give him the authority through a power of attorney.
The Pooled Managed Forex Trading Accounts
The very obvious problem with a pooled managed forex trading account is the transparency of the transactions made by the account manager. Profits may come to you on a monthly basis either as a fixed rate or dependent on the returns gained by the pooled account. But you may never be able to actually verify if the trades really reflect the amount of profits that you get. This is because you can never see the actual statements of transactions that were made in the pooled account simply because it is not your account. It is the account of the forex account manager. What you see is only what the forex trading account manager chooses to let you see.
Even worse is if the pooled managed forex trading account that you have chosen runs on some type of pyramiding or Ponzi scheme. Simply put, these types of investments are not really investments that rely on market transactions to earn money. Ponzi schemes rely on the recruitment and additional fund investments coming from a base of investors to keep the fraud going. They usually promise investors a fixed amount of 5%-10% a month. And they can usually deliver since in would take 12 to 20 months before your whole investment is returned to you. But even before your whole amount of investment is given back to you, the Ponzi scammer would do everything, not only to stop you from getting your profits, but also to lure you into investing more money in exchange for, say, a higher interest rate. Sometimes they even give incentives or bonuses if your can recruit additional investors to put money into the pool. On their side, this is the only way to keep the scheme from collapsing, by feeding the fraudulent system more money to keep it going. It usually takes a number of years for a Ponzi-type or pyramiding scheme to be exposed because of this. So be very alert of these kinds of investment schemes.
The Red Flag Of Guaranteed Returns
Most legitimate managed forex trading accounts do not guarantee profits. What they promise is the best effort to make profits for you account. Although there may be some which can guarantee positive results, be wary if they assure you of high rates. Most probably, these are just being used to lure you into investing. Of course, trading history and past performance records are another matter. They can give you an idea of how profitable a managed forex trading account has been in the past. But those are still not guarantees that they shall be achieved in the future.
Also, take note of the kind of management fee that these managed forex trading accounts charge you in exchange for them handling your currency account. Some charge you a fixed monthly fee while others take a certain percentage of the profits that is made with your trading account. And still, some charge both a fixed amount, plus a percentage of the profits. But however they take their professional fees for their services, you should always compute if what they are charging you is too high that it might actually be better if you do the trading yourself. Remember that the reason you probably chose managed forex trading is that you want more profits for your account since you do not have the time to focus solely in your trading. But if the end result is that profits are actually less when you invest in managed forex trading, then it would be more feasible for you to trade your own account, or choose another account manager who can give you better results.
NFA And CFTC License And Registration
If the forex management company is in the US, then verify if they are registered with the NFA (National Futures Association) and the CFTC (Commodity Futures Trading Commission). These are the regulatory agencies that protect investors from unscrupulous scammers. Visit these websites by doing a google search, and not relying on the links provided in the website of the forex account manager as this may send you to a fake website. Go to the NFA and CFTC websites and verify if they are registered and check if there are complaints filed against them.
If the managed forex trading manager is not based in the US, try verifying if they are registered with the regulating agency of the country they are based in.
Investigate Before Investing In A Managed Forex Trading Account
And the best way to make sure that you do not lose money with a managed forex trading account is to investigate. Do your searches in google. Read the forums about complaints and other redflags. These managed forex trading accounts shall be handling your money. It is only fitting that before you give them control over your hard-earned funds, you should make sure that they are not scam artists out there to defraud you of your investment.
If you are investing a substantial amount if money with any managed forex trading account, you may even hire a professional investigator to cover all you bases and make sure the company you are dealing with is legitimate. Remember that you may be able to save lots of money by making sure that you are not investing in a managed forex trading scam.
If you do not have time to learn forex yourself, or if you do not have the skills to trade currencies yourself, then find the time to investigate the managed forex trading account you shall invest your money in. There is simply no shortcut in being a safe investor.
