Like all financial commitment choosing an forex managed account requires some serious evaluation. Whilst there is the need for the usual cautions associated with investing, managed forex has some specific issues that are unique to fx trading, so it is essential to become acquainted with those. Here are many of the most important elements that need to be considered by potential investors.
1) Complete Control over Your Funds
It is extremely important that you maintain complete management of your funds at all times through the whole managed account process. You should be allowed to deposit, withdrawal and revoke the ability of the trader to trade your funds at any time. In addition you should have access to charts and other forex tools. In case your managed account provider cannot give you this kind of functionality don’t even consider using them. Any other type of arrangement where you don’t have complete control over your funds leaves you open to abuse, fraud and general trader incompetence.
2) Managed Account Performance
Obviously you would like to find a managed forex provider with a successful and proven history. Ideally you need to find a provider with two years of history or maybe more, and preferably a live statement on MyFxBook. This procedure alone should reduce the field of prospective providers by 95%. If they cannot supply original trading statements from the broker, then there is a very high probably that their figures are fabricated. Time after time I have witnessed companies and individual traders offer up impressive figures only to then witness them completely wipe out a forex account in days.
3) Money Management
Any professional currency trader will vouch for the truth that probably the most often overlooked factor for amateur traders is money management. The simple fact of the matter is that no trading method is complete without sound money management. Even a mediocre trading system can be profitable with the addition of sound money management principles. To apply sound money management takes considerable discipline and focus, attributes that in reality most traders simply lack. A managed account trader must possess these attributes to be a successful trader.
4) Which Broker You Opt For
An important ingredient in a profitable managed account program is a good broker. If you overlook this point it might be to your detriment. Large spreads, commissions and poor trade execution can make even the best trading strategy unprofitable. Small delays in processing withdrawals costs you thousands in lost opportunities as well as time that you just can’t get back. Search the internet for brokers that provide these types of features. If the managed forex provider recommends a particular broker do your own due diligence on the broker and ensure that you are satisfied they can deliver the sort of service you are looking for.
5) Negative Trades, Floating Losses and Draw Down
Draw down is one of those inevitable facts of life associated with forex trading. Nobody likes trades that go into a floating loss or a series of losing trades that cause your account to “draw down” into negative territory. From experience it is simply a matter of time before this happens to your account. But what constitutes “acceptable” draw down, and draw down that compromises your entire trading account? If they have drawn down more than 30% I would be seriously reconsidering whether it is a viable strategy to use. If it’s over 40% don’t even consider it. You then need to decide on what kind of draw down figure you’re confident with.