Forex trading has become a growing trend that has taken the alternative investment markets by storm.  At one point 20 years ago, managed forex was a small investment niche which very few were successful in.  Today, just two decades later, it has become the most widely traded investment market in the entire world.

Due the growing access to information on forex, as well as the high yield potential, there are now thousands of wealthy investors looking for managed forex investments at this very moment.  Though this is great for the markets, the problem is, most investors go into managed forex investments before they should, making critical mistakes along the way. In this article, we will cover the most common of these mistakes, investing with a offshore forex trader.

Despite its monumental growth in recent years, forex is still a widely unregulated market, even after the recent NFA/CFTC law changes. To add to this problem, most investors don’t even know what type of license a forex trader must have to legally pool money and trade.  In addition, most investors have no idea how to evaluate a managed forex investment, whether it is domestic or offshore. Facts such as these have lead to a market filled with high demand, and plenty of undereducated investors eager to reap the “high profits” of forex trading.  In response to this ripe environment, private forex traders and offshore forex companies flooded the market to meet the demand of investors, aiming for “HIGH YIELDS”, while claiming “low risk” to thousands of clients around the world.  As you would expect, this recent movement in the private forex world has lead to stories of great success, but most often, it has lead to immense disaster.

Since many investors we have spoken to have had trouble with offshore forex investments, we felt that we should communicate some key tips to protect you if you choose to pursue the same avenue.  Take a look below, and soak up the knowledge!

Tips for Offshore Managed Forex Investments

1.  Be Very Cautious with Private FX Traders:  Private managed forex traders are already risky to invest with, but if they are also offshore, you have a recipe for disaster. Even if they are not in the USA, ask them for some sort of license or certification in their country which allows them to trade others money.  Remember, all traders must be held accountable in some manner, no matter what the situation.

2.  FX Accounts Must Always be Transparent:  If you are sending money to an offshore forex broker, make sure the account is completely in your name, and you have access to it at all times.  Sending money directly to a “forex trader” will reduce the transparency of the account, and in many cases, you can be scammed out of your investment.

3.  Always Withdraw the Initial Principal:  Once your account doubles, ALWAYS withdraw the amount you initially invested. If everything runs smoothly and the funds return to your account, you have just eliminated your risk, and have likely found a good managed forex investment.

4.  Make Sure there are References:  Though I am not a stickler about references, I feel they are a MUST for any offshore forex investment.  If you are investing based upon the word of a forex trader thousands of miles away, you may just deserve to lose your money.   In all honesty, if the trader is not licensed, can’t show you proof, and resides in another continent, you really have little chance to succeed.

5.  Keep in Touch with Other FX Investors:  If you are lucky enough to have references, or know others who are investing with the same forex trader, keep in touch with them. It is always good to compare notes, and make sure there are no inconsistencies that have popped up.

6. Define Accountability and Contract Obligations:  Before investing with any offshore forex trader, you must always feel comfortable with the contract you sign.  If the contract presented to you is bare, as most are, make sure to define accountability, and the various obligations the trader must fulfill.   This can be accomplished by adding addendums to the contract, as long as both parties agree to it. By doing so, you may have the opportunity for recourse if something unsavory was to occur.

7. FX Trader Must Guarantee Max Drawdown:  If you are working with a licensed forex investment, HUGE drawdowns can usually be avoided, but with offshore forex investments, this is usually not the case. When you first speak with an offshore forex trader, you should address their stop loss strategy, and ask them to guarantee a max drawdown limit (i.e. Max % of account value at risk).  If they are unwilling to add this agreement to the contract, it may not be a good idea to proceed. Unfortunately, we have heard stories from a number of managed forex investors who were raking in the profit, just to see it ALL disappear overnight.

8. Conduct Thorough Due Diligence on the FX Trader:  If you are investing with an offshore forex trader, it is more important than ever to complete a thorough background check. The problem is, if the trader lives in another country, how can you complete due diligence when you do not know of the proper channels to do so?  In all reality, most of the time you can’t access the information you need on an offshore fx trader, which is another reason we feel it is risky.

9. Never Pay Attention to Hypothetical Track Records:  Offshore managed forex traders are HIGHLY UNLIKELY to have their yields audited by a credible third party.  With this in mind, you should NEVER make decisions to invest with an offshore forex trader based upon their history of yields.  Though the numbers may look great, there is no way to truly know if the figures are real, or just hypothetical.

10. Never Send the Money Directly to a FX Trader:  There is really never a reason to send money directly to a forex trader, offshore or not.  Forex investments will always have a clearing house or FX broker that holds the funds of the investors, for this and other related reasons.  Though you CAN lose your account on a bad forex trade, it is better to have that risk than having someone run away with your money.

Just like any other alternative investment, taking the risky route can pay off, but it rarely does.  With offshore managed forex investments, you can easily find the opportunity of a lifetime, to see it all implode overnight!  Personally, I do not like to invest or refer people to a forex trader without a licensing history, and accountability for their mistakes.  In most cases when investing in offshore forex programs, this is exactly what you’re left with.  No matter how good someone sounds on the other end, it is hard to invest strictly based upon someone’s “word”, and hypothetical yields.

Though this article is merely our opinion, PLEASE be careful when working with offshore managed forex investments. We have received plenty of phone calls from investors who were burned by offshore forex traders, and most never saw it coming.  Since this has become such a consistent story, we felt it was critical to reinforce the seriousness of this issue one final time before ending this article.

If you have any insight or questions, as always, feel free to post them below. We truly appreciate any new input, and thank you once again for a few minutes out of your day.

InsideTrade LLC Staff
(412) 235-2855