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Top 10 Mistakes of Managed Forex Investors

forex-traders-riskWith any investment, there are those who are prime for success, and those who are headed for disaster.  The key difference between the two can be summarized in one word, preparation.  Though it sounds elementary, when many hear of the high returns in managed forex, they skip several common sense steps and go in head first. When you jump into forex with high hopes, you’re rolling the dice with your entire account on the line.

In this article, we will communicate the key points of managed forex investing, allowing you to avoid the common pitfalls on your way to success. After reviewing the top mistakes of managed forex investors, immediately, you will be ten steps ahead of any beginner. This will help you understand the complex nature of forex investing, and all that comes with it. What are you waiting for? Scroll down, and take a look below!

Top Mistakes of Managed Forex Investors

1.  Chasing High Yields in Managed Forex: High yields are great, but long term stability is far more important.  This is especially true in volatile markets like forex. If you are new to managed forex, go with a trader using a low to moderate risk strategy. If you would like higher yields, you can always step it up after gaining some experience.

2.  Working with Unlicensed Forex Traders: If a forex trader is licensed, they are accountable for mistakes and will usually do their best for your account.  On the other hand, private managed forex traders tend to be risk takers, having their own interests in mind.  In short, investing with private managed forex traders is risky, and most success is usually short-lived. Licensed currency traders may offer lower yields, but your success will be  longer lived.

3.  Investing with a New Forex Trader: If a forex trader doesn’t have a track record or licensing history of over 2 years, it can be risky to invest with them. Usually, over the course of 3 years, there will be a huge event in the market which will test the trader’s strategy.  Unfortunately, it is rare that any forex trader will stay successful and licensed for this 2 year period. Those who do last are the best of the best, and are usually the ideal traders to invest with.

4.  Investing too Much Money in Managed Forex: In you’re smart, you should never invest more than 30% of your money in managed forex investments. Though some may choose to invest more, it should only be done by those with a high risk tolerance.  Desperation and anxiousness can lead to poor decisions, and as we’re sure you know, managed forex can be a double edged sword.

5.  Not Withdrawing Money from your Forex Account: If you are earning profit in your managed forex investment, why not withdraw some?  Though we do encourage compounding, we also encourage safety. If you are not working with a licensed managed forex investment, it is always best to withdraw your initial investment once the account doubles in value.  This ensures you will recover your principle, even if the worst case scenario develops.

6.  Investing in Forex without References: Going into a managed forex investment without a reference is a huge mistake. If a trader is successful at all, he will surely have one client who can vouch for him. If he is not licensed, and will not provide a reference, that is a sure sign to move on.

7.  Investing with Offshore Forex Traders: Even though there are profitable offshore forex traders, investing offshore has become quite risky.  In recent years, there have been a number of scams and phantom forex traders that have used offshore FX programs to swindle money. If you invest in a forex program on the other side of the world, you will have NO legal recourse if anything happens. Since there are multiple jurisdictions involved, you are usually left with sand in your pocket.

8. Finding Private Forex Traders on the Internet: In the era of Craigslist, BradyNet, and other social networking sites, you must use more caution than ever when evaluating alternative investments. Though some may think forex trading is easy, it isn’t.  In all reality, it is far harder to manage other people’s money than you’d think.  With this in mind, don’t trust private managed forex investments with no proof and hypothetical returns. The fact is, you can find a thousand of these offers on the web for a reason.

9. Sending Money Directly to a “Forex Trader”: There should always be a clearing house or FX brokerage which holds the investor’s money.  This entity should be licensed, and in good standing with their regulatory authority (SEC, NFA, FINRA, etc.). If you choose to send the money to a managed forex “trader”, and not a licensed third-party, they could be running a scheme. There is no reason to allow someone to withdraw or handle your money in a managed forex investment. Doing so could lead to unfortunate consequences and a lot of regret. It’s one thing to lose it all on a bad forex trade, but it’s a whole different story when you are victimized by fraud.

10. Investing without Understanding Forex Trading: If you don’t understand forex trading and expect to hit the jackpot, think again!  If you are not properly educated in managed forex investing, you can end up making poor decisions very easily. Do yourself a favor and get a firm grip of the concepts behind forex trading, it will be well worth your time.

Though these “mistakes” may not backfire, actions such as these produce a high risk environment. In a high risk environment, you can prosper for a short period of time, but the law of averages always leads to some manifestation of that risk. Risk taking is part of the game, but it’s best to limit your exposure any way you can.

In summary, managed forex investments can be great, but only if you know how to qualify the trader.  As with everything, your preparation is the key to achieving your goals. If you stay educated, diligent, and persistent, you’ll always be in the driver seat to managed forex success…

InsideTrade LLC Staff
Phone: (949) 444-2111
Info@InsideTradeLLC.com

14 Comments »

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  • Faris said:

    Dear Sir:
                 I have  Learned a lot of information about the managed accounts … Thank you very much.
    My question is , where can I find the licensed Forex traders in the NFA .I have triad find only the names of registered brokerage firms only.
    Waiting for your reply and send a link site, if any, with all due respect.

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