A managed forex account is an opportunity for investment for the traders that want the potential of returns from leveraged forex trading, prefer to have professionals take care of the work of trading and selection, and are not afraid to take serious risks. In this case, money is kept in a forex account and a professional is in charge to trade the money in the forex markets. Investors that choose managed forex accounts expect to earn unusually large gains, but they also understand that there are chances of severe losses.
An Explanation Of Managed Forex Accounts
Compared to bonds or stocks, managed forex accounts provide exposure to an asset class much differently. Equities deliver returns in the form of dividends, share growth or interest payments, but forex traders earn in value when the value of one currency rises with the fall of another. Traders and investors that invest in currencies as an asset class do that for either hedging risk in the international markets, or as speculators who identify the large shift opportunity in values and pricing between international markets.
Usually, individual speculators open forex accounts and try to trade according to their own information and speculation. Most people find this very difficult, but the very few that can do it successfully can make extreme returns that multiply typical equities markets. By using the services of professional managers, you can try to skip the extra time and gradual loss that is the result of experienced trading in this market. You can always trust a seasoned professional to deliver better returns.
Costs and safety of managed forex accounts
Generally, sophisticated traders use foreign exchange markets that can handle large amounts of borrowed money and take their advantage to amplify their gains. Compared to the stock market offers, forex markets have a faster-paced trading action and more liquidity. Due to the fact that it is the most active market in the world and the costs of the transaction are lower, it is a popular forum for the traders who enjoy the thrill of prediction.
However, this market can be dangerous for traders who may not have experience of a good understanding of the impact of high leverage on the returns. People who do not have a clear concept of the effects of different news events such as central bank monetary policy decisions and economic releases on currency prices will also find it difficult to earn profits from trading.
Traders who prefer exposure to the market, as well as another asset class but are not experts in foreign currencies may go for a managed forex account. By using such accounts, they can benefit from the expertise of a proven and experienced forex trader. However, there is a disadvantage too. The best managers would charge high-performance fees which are 20%-30% of the total earnings from trade.
Now, how to choose forex managed accounts? When you decide on one, it is a must to consult the calmer ratio of the prospective account manager. This ratio compares the average yearly compound rate of return of the trading fund with the maximum drawdown during the period. Usually, the duration for the measurement of this ratio is three years. You can be sure that the manager’s risk-adjusted return will be superior if the calmer ratio is higher. On the contrary, the risk-adjusted return will be worse with a lower ratio.
There are similarities in purpose between managed forex accounts and managed futures accounts. The difference is the managed futures industry is more regulated. Do not confuse two industries with one another.
The bottom line
If you want to choose the best forex managed accounts for you, you must research the top professionals. You can see how they manage the account and seek trading opportunities, adjust risk, implement their own strategies, and also take input from the owner of the account on how they would prefer to trade. MT4 and MT5 which are the most popular FX platforms in the world both can have money managers manage accounts through them. Those are called the MAMM account. The best forex managed accounts brokers of 2020 are FXTM, CMC Markets, ActivTrades, Fpmarkerts, and Pacific Financial.
