5 Essential Elements to Consider When Investing in Managed Forex Accounts
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When choosing potential forex investment opportunities there are many things to consider. Listed here are five things you need to consider and keep uppermost in your mind as a potential investor in managed forex products. This is not intended to be a complete list but is only a basis from which to build a successful Managed Forex portfolio. In the end it is up to the individual to do their own due diligence and not simply count on the advice of other third parties.
1) Do You Have Complete Control of Your Funds?
The absolute most significant factor to weigh when evaluating managed account options is ensure you always have control over your funds all the time. If you are dealing with a reputable Fx broker, and this should always be the case, you should not have too much to worry about in this respect. Further down we cover more on this aspect. If you avoid any type of pooled fund arrangement and use a LPOA or "Limited Power of Attorney" you should then be able to revoke the right of the trader to trade the account should the unthinkable eventuate. Best to be safe than sorry.
2) Historical Performance
Obviously there is a huge advantage in being able to see a managed forex account traders historical performance figures. They also need to be verifiable figures, in the form of original statements. A spreadsheet of numbers or a table on a website does not constitute verifiable figures, no matter what the trader or company does to try and back up their claimed performance figures.
3) Money Management
When it's all said and done all you really have to go off when it comes to 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 website or a lot of Excel spreadsheets, these just cannot be verified as authentic. If the provider can't provide you with verifiable documentation to validate their performance claims you must assume that their figures are bogus.
4) The Broker
Another important fact to consider when selecting a managed trading account is which broker they use to execute their trades. Do they offer tight spreads and fair trade execution and do they process deposit and withdrawal requests in a timely fashion? A bad broker can really ruin your whole managed account experience. Often I have had to deal with brokers who take weeks to process your withdrawal requests and can also take weeks to place your funds into trade. This can end up costing you thousands of dollars and months of wasted opportunities. Frequently it's bureaucratic incompetence while in other cases it may well be something more sinister, all the same it is advisable to study up on prospective brokers and see if they have a good bad or indifferent reputation amongst other traders.
5) Draw Down
Something that traders dread, but invariably have to deal with is draw down. What constitutes an acceptable level of draw down, and what is down right dangerous to the safety of your trading account? Personally I set the figure at approximately 25-30%, others prefer a more conservative 15% whilst others can deal with 50%. For me 50% is simply to much and difficult to get over. You basically have to then double your account just to recover your original amount. A difficult feat to achieve. Whatever amount you decide on stick to it and don't be tempted to trade out of an impossible situation. That is simply gambling not trading.
To conclude follow these 5 points and do your own research on any prospective investments you look at. Every success to you with your trading.
About the Author
Dan Jackson
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