Important Tips for Managed Forex Accounts
As successful FX investors and traders, we appreciate all the FX market has offered our company. Every day we wake up with another opportunity to profit, one day closer to mastering this ticket to infinite wealth. Though we wish everyone’s story was this happy, the fact is, forex is more complicated than you think.
With the rapid growth of managed forex accounts, we’ve listed some tips to help you steer clear of potholes. This will allow you to analyze FX investments through the eyes of a pro, focusing on just 5 critical areas. Are you wondering what these 5 areas are? Well, scroll down and take a look!
Tips for Managed Forex Accounts
1. Max Draw Downs of FX Trader: When you meet a forex trader, ask them for a copy of their trading history. If you see months with 20% or more in losses, this could be a sign of future problems with your account. Also, if you notice any more than 3-4 months/year with negative yields, their strategy may be unsound. After reviewing their track record, ask them what happened during the month with the highest loss. If it seems like they’re vague with their answer, they may trade on instinct or rely on “automated trading programs”. Either way, both of those circumstances produce high risk. Once you’ve covered everything else, ask the managed forex trader to explain their “stop loss” procedure. This is critical to address, since some traders follow their ego and “let it ride” well past the “draw-down limit”!
2. FX Trader Licensed or Not: Before investing in managed forex, you must first decide if you want a licensed or a private trader. Though private traders may have higher yields, we believe all investors should start with licensed forex. In today’s market, private managed forex has become very risky and should only be pursued by experienced FX investors. In contrast, it’s very simple to make a good decision with licensed forex investments. All you need to do is visit the NFA website, check their licensing history, and follow the other tips in this article!
3. FX Account Opening Details: If you choose to open a managed FX account, there is a certain process you’ll follow. First, you receive a contract from a FX broker disclosing risks, fees, and other legal details. During this stage it’s critical to define the “accountability” of the trader. Second, your FX account number is created and sent with the wiring instructions for the account. At this stage, it’s critical to make sure you are sending money to a segregated account in your name, not to the forex trader’s. Third, once you have been in trade for a month or so, evaluate the transparency, communication, and account fluctuation over that time. If they’re licensed forex traders you can usually relax, but if they’re private, you should pay close attention to every detail!
4. Audited FX Track Record: If you find a managed forex investment, see if the trader has a track record of two years. If they can’t provide that much history, it’s a sign that future markets may test their strategy. Usually, over the course of two years something unexpected happens, testing the validity of the trader’s strategy. This is when the real traders swim, and the less experienced sink. If you are speaking with a private FX trader, remember, all yields should be considered hypothetical. Unless you know someone who can validate their success, the returns are worthless.
5. FX Trader’s Assets Under Management: When you meet a forex trader, you should evaluate their trading strategy in relation to the amount of capital they have under management. Some FX traders make amazing yields with less than 10M under management, but as their fund grows, their strategy starts to show its holes. As many FX traders learn the hard way, trading with more money increases the chances of “slippage”. In short, “slippage” effects the prices you enter and exit at. For example, a trader with 10M under management may enter a rising Crude Oil market at the right price (ex. 82.10), but a trader while a trader with 50M under management gets a price that is less favorable (ex. 82.60). To explain, when you’re opening 500 positions at once, it’s a lot easier to get your price than 5,000. With this being said, look for managed FX traders with a large amount of under management (50M+), or smaller FX firms with little plans for growth. Either way, ask the FX trader about their plans for new growth, and how their strategy will adapt to it. This could be a potential hurdle in the future which could alter your path to success.
By understanding the tips listed above, you can protect yourself from errors and move swiftly towards your goals. The reality is, you’ll find a ton of FX investments, but REMEMBER, our tips are the key to your success. Why roll the dice and test fate? If you’re a smart investor, you’ll start off conservative and increase your risk slowly. To summarize our point, let’s ask you a simple question?
Wouldn’t you rather earn 75% per year for 20+ years vs. 300% for 1 year?
If you’re not brain dead, the answer is a simple YES. In fact, if a 1M account earned 75% for 10 years, it would compound into 250M+! Yes, those figures are correct! Now you can see why we keep saying “stay patient”!
Stick to the rules and remember, you don’t have to swing at the first “pitch”. As any Billionaire will tell you, long term wealth requires patience, NOT erratic decisions…
InsideTrade LLC Staff
Phone: (949) 444-2111