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Are Forex Managed Accounts? Who Is It Most Suitable For?

Forex Managed Accounts

Who Should Use A Forex Managed Account?

Forex-managed accounts can be used by individuals who want to participate in the forex market but donít have enough knowledge or skills to do it on their own. Basically, forex-managed accounts are great for those who prefer to have experienced individuals handle their trading accounts on their behalf. As an investor, you have to entrust your funds to experienced traders but make sure that you check their past performance and track record before you invest your money. Typically, professional money managers aim to generate returns on your behalf, and for this, they even charge commissions which may be a flat fee or a variable fee that depends on the percentage of your share. So, itís not only the investors who should make use of such accounts but many experienced traders who have the skills to handle other tradersí funds.  

Things To Consider While Determining the right forex-managed Accounts

Choosing the right forex-managed account is not easy, you have to look for a reputable money manager with a proven track record of successful trading. A good way to assess their performance is to check the history of their trades. It will also give you a fair idea of the money manager’s risk management practices.

The Forex-managed account should also give you complete transparency. You should get regular updates and financial statements to stay in touch with your account’s progress. 

Another important aspect is the fees. As I mentioned above, different money managers have different pricing models. So, the charges of some money managers may be higher than others. To make sure that you’re getting a fair deal, you should compare the costs among different providers. 

Itís also a good idea to evaluate the level of flexibility and control you have over your managed account. Some providers allow you to set specific risk parameters so that the outcomes of your trades are within your limits, but some providers wonít let you do it. Lack of control over your account can also mean that you will get unpleasant surprises that may come in the form of a substantial loss. Always check whether you can tailor some parameters to your needs to avoid this.

What are the main advantages of forex-managed trading accounts?

  • Return generating: The potential for generating returns without the need for extensive knowledge or time commitment is one of the greatest perks of forex-managed accounts. You can leverage the skills of experienced forex traders to generate profits and maximise your chances of success.
  • Profit-making made flexible: By opting for a managed account, you can rely on the expertise of professional traders who have in-depth knowledge of the forex market and can adapt their strategies to take advantage of various market conditions. This flexibility gives you the freedom to earn profits while you are still in your learning stage and figuring out how to become consistent in a demo trading account. 
  • Source of passive income: These accounts can also serve as a source of passive income. You donít need to actively engage in trading yourself to make money through managed accounts. A professional takes care of everything on your behalf.  
  • Diversification: You can diversify your portfolio by investing with a money manager, which is a great tactic for mitigating risk.
  • Controllable: When you opt for a managed account, you maintain control over your investment decisions. You have the freedom to set your risk tolerance (you can use trading calculators to identify your risk limits), investment goals, and overall trading strategy. The money managers execute trades based on your preferences, ensuring that your investment aligns with your specific needs and objectives. 
  • No manipulation: The possibility of personal biases or emotions influencing the trading decisions is nil in managed accounts. Money managers adhere to a disciplined approach allowing them to conduct their trades objectively and without manipulation. 
  • Liquidity is high: The main advantage of these accounts is their high liquidity. The forex market is the most liquid financial market globally, and by investing in a managed account, you benefit from this liquidity as your trades can be executed quickly and efficiently. 
  • Use of Leverage: A skilled money manager understands how to use leverage while employing proper risk management techniques. This balances the benefits of leverage and minimises its potential drawbacks. 
  • 24/7 Trading: The forex market operates around the clock, five days a week, allowing for continuous trading opportunities. This means professional traders can monitor and execute trades on your behalf at any time, taking advantage of global market fluctuations. This means you don’t have to worry about missing out on potential profit-making opportunities due to time zone differences or limited trading hours. 

How to select a suitable forex-managed account?

As an investor, if you want to participate in a managed account, you must know how it works. Itís not a complex process. You just have to find a reputable money manager or brokerage firm and invest some capital with them. After that, they will handle the trading activities for you, and you will typically have access to regular reports and updates on your account’s performance. But the money manager charges a fee or a percentage of the profits as compensation for their services. As such, the important criteria that you should ideally look for to choose the right forex-managed account are the reputation of the money manager/forex broker and the fees charged by them. 

Who should opt for forex-managed accounts?

  • For busy individuals: Forex-managed accounts can be an excellent option for busy individuals who want to participate in the fx market but might be juggling multiple responsibilities that donít let them trade actively. They can passively participate in the market and generate income with managed accounts.
  • For people who are okay with trusting experts: Not every trader is comfortable with placing their trust in another traderís expertise, but if you’re willing to rely on experienced and knowledgeable professionals, then a managed account can be a suitable choice, especially when you donít have a deep understanding of the forex market. 
  • Donít have the right temperament to become a trader: Trading in the forex market requires discipline, patience, and the ability to handle the emotional ups and downs that come with it. If you find yourself lacking these qualities or prefer to avoid the stress and pressure of making trading decisions, a managed account can be a smart choice. 

Who should NOT opt for forex-managed accounts?

  • Individuals who want complete control over their trading accounts: Forex-managed accounts may not be suitable for those who desire full control over their trading accounts. If you have a strong preference for making all the trading decisions, managing your own strategies, and executing trades based on your personal analysis, a managed account might not align with your preferences because, with a managed account, you have to give up some degree of control over your account. 
  • Traders who donít have sufficient funds: If you don’t have enough funds to meet the minimum investment requirements set by the money managers or brokerage firms offering the service, then you should probably drop the idea of using a forex-managed account. Setting a minimum threshold ensures that the managed accounts can be effectively managed and that the profits generated are worth the effort. If you don’t have sufficient funds to meet these minimum investment requirements, accessing the benefits of a managed account may be challenging. In such cases, it might be more suitable to focus on building your trading capital first or exploring alternative investment options that are more accessible with lower capital requirements.
  • People who donít like to be vetted: When opening a managed account, money managers or brokerage firms typically conduct a vetting process to assess your suitability as an investor. This process may involve evaluating your financial background, investment goals, risk tolerance, and other relevant factors. If you’re someone who prefers to maintain privacy or feels uneasy about sharing personal and financial information for vetting purposes, a forex-managed account may not be the right choice for you. There are better options available for you, such as white label, which allows you to become a forex broker of your own with the help of an established broker, or you can sign up for an IB (Introducing Broker), which is a kind of affiliate program where you would earn commissions for introducing the broker(s) to your clients. You donít have to share any personal details or money-related information with anyone in both of these programs. 

Basics of Forex Managed Accounts

Forex-managed accounts are trading/investment accounts where experienced traders or money managers make trades on behalf of the account holder. The basic idea is to allow everyone to participate in the forex market, despite their experience level or time constraints. In a managed account, experienced traders make trading decisions on behalf of the account holder or the investor. Investors donít have to do a lot of work, so regular monitoring of their account’s performance would do the work for them.

Conclusion

To conclude, forex-managed accounts are suitable for both novices as well as expert traders and help them grow their revenue. If you are interested in a managed account, you must try it with a small capital and decide for yourself if itís suitable for you.