When selecting potential forex investment opportunities there are many things to consider. Here are five things that we consider should be uppermost in the minds of potential investors in managed forex products. This is by no means a comprehensive list but is a sound basis from which to build a successful Managed Forex portfolio.
1) Control of Your Funds
The most important single factor when considering investing in a forex managed account is to have absolute control of your own funds. You need the ability to be able to deposit, withdrawal and cease the trading of your account 24/7. If your managed account provider cannot give you this type of functionality do not even consider using them. Any other type of arrangement where you do not have complete control of your funds leaves you open to abuse, fraud and general trader incompetence. Unfortunately over the years we have witnessed too many instances where this simple precaution alone could have saved investors from losing their life savings and quite literally ruined them financially and otherwise. Make sure that when you send funds, that they go directly to the account of the forex broker, not an intermediary. Also make sure that you are provided with an "LPOA" or "Limited Power of Attorney" form that allows the trader to place trades on the account but gives them no access to deposit or withdrawal funds.
2) Historical Performance
When it is all said and done all you really have to go off in terms of deciding on a Managed Forex provider is their history. Their history needs to be verifiable, that is audited or displayed as original statements with known authenticity. Don't settle for a table on a web page or a bunch of Excel spreadsheets, these simply cannot be verified as authentic. If the provider cannot present you with verifiable documentation to validate their performance claims you have to assume that their figures are bogus.
3) Good Money Management
Any professional forex trader will vouch for the fact that the most often overlooked factor for amateur traders is Money Management. the simple fact of the matter is that no trading strategy 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) The Broker
Never overlook the importance that your broker has in determining a successful trading outcome. Often I have witnessed trading systems excel on some brokers whilst completely tanking on others. The broker should be able to provide competitive spreads or commissions on trades, as well as be able to process any deposits and withdrawals in a timely fashion. Delays in processing withdrawals and deposits can be both expensive and time consuming. Look on the internet forums for broker recommendations. There are many good forums that give an unbiased opinion in regards to brokers. Do you own due diligence on the broker specified by the managed account provider and make sure that they come recommended.
5) Minimal Draw Down
Before you start with a managed forex account check out what their lowest historical draw down figure is. If they have drawn down more than 30% I would be seriously reconsidering whether it is a viable strategy to use. If it is more than 40% don't even consider it. You then need to decide on what kind of draw down figure you are comfortable with. This comes down to your own risk tolerance and nobody can really answer this question for you. So many times I have witnessed people let their trading account get traded down to nothing before they act. I am not sure what is going on there, but you really need to have a figure set in stone that you are not prepared to go beyond. Flexible rules invariably get broken, so decide on a figure, I would suggest somewhere between 15 to 30% and stick with it. - 22871
1) Control of Your Funds
The most important single factor when considering investing in a forex managed account is to have absolute control of your own funds. You need the ability to be able to deposit, withdrawal and cease the trading of your account 24/7. If your managed account provider cannot give you this type of functionality do not even consider using them. Any other type of arrangement where you do not have complete control of your funds leaves you open to abuse, fraud and general trader incompetence. Unfortunately over the years we have witnessed too many instances where this simple precaution alone could have saved investors from losing their life savings and quite literally ruined them financially and otherwise. Make sure that when you send funds, that they go directly to the account of the forex broker, not an intermediary. Also make sure that you are provided with an "LPOA" or "Limited Power of Attorney" form that allows the trader to place trades on the account but gives them no access to deposit or withdrawal funds.
2) Historical Performance
When it is all said and done all you really have to go off in terms of deciding on a Managed Forex provider is their history. Their history needs to be verifiable, that is audited or displayed as original statements with known authenticity. Don't settle for a table on a web page or a bunch of Excel spreadsheets, these simply cannot be verified as authentic. If the provider cannot present you with verifiable documentation to validate their performance claims you have to assume that their figures are bogus.
3) Good Money Management
Any professional forex trader will vouch for the fact that the most often overlooked factor for amateur traders is Money Management. the simple fact of the matter is that no trading strategy 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) The Broker
Never overlook the importance that your broker has in determining a successful trading outcome. Often I have witnessed trading systems excel on some brokers whilst completely tanking on others. The broker should be able to provide competitive spreads or commissions on trades, as well as be able to process any deposits and withdrawals in a timely fashion. Delays in processing withdrawals and deposits can be both expensive and time consuming. Look on the internet forums for broker recommendations. There are many good forums that give an unbiased opinion in regards to brokers. Do you own due diligence on the broker specified by the managed account provider and make sure that they come recommended.
5) Minimal Draw Down
Before you start with a managed forex account check out what their lowest historical draw down figure is. If they have drawn down more than 30% I would be seriously reconsidering whether it is a viable strategy to use. If it is more than 40% don't even consider it. You then need to decide on what kind of draw down figure you are comfortable with. This comes down to your own risk tolerance and nobody can really answer this question for you. So many times I have witnessed people let their trading account get traded down to nothing before they act. I am not sure what is going on there, but you really need to have a figure set in stone that you are not prepared to go beyond. Flexible rules invariably get broken, so decide on a figure, I would suggest somewhere between 15 to 30% and stick with it. - 22871
About the Author:
Brendan Wilson is a forex trader with 12 years experience. Brendan is also associated with Forex Managed Accounts. Managed Forex Trader provides information and services to people interested in investing in Forex these can be view at Forex Managed Funds.
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