If you wish to get involved in the lucrative world of forex trading but don’t know where to start, forex managed accounts may be your solution. Fx trading, which is also known as foreign exchange or currency trading, is a complex skill that takes many months of practice.
Even if you have serious funds to invest, you cannot jump straight in with trading on your own account and expect to generate profits. People who do that are almost certain to lose in a big way. Most traders therefore start out with a demo account and use that for practice. They spend a long time testing systems and learning to deal with the stress and uncertainty that is inherent in something as risky as speculative trading. Finally they may feel ready to go live, but still only with small amounts at first. It is not possible to make lots of money fast from a standing start in the forex market.
Forex managed accounts get around this by having somebody else do the trading for you. This enables you to start making money from the get go, provided of course that you choose your forex account manager wisely.
There are 2 kinds of managed forex accounts and there are big differences between the two.
1. Standard Forex Managed Accounts
With a standard managed account you hold your money in a brokerage account and your manager has access to it to trade. They will work on your behalf and hopefully make even more money than you could if you were doing this yourself. Concurrently, you retain full control and can withdraw your money any time you want.
This type of account generally must be funded with several thousand dollars at a minimum. The reason is that it is not worth the manager’s time to trade your funds if you only have a couple hundred dollars. They will be working for a percentage so they need a particular level of funds to make a reasonable amount for themselves.
Always check the terms carefully and in particular, look at how the managers make their money. Do they take a straight percentage from you, or are they taking part of the spread or receiving commission from a recommended broker? Some of these options may have an impact on how they trade your funds, which might lead to a conflict of interest.
2. Pooled Forex Accounts
These accounts are a little like investing in mutual funds. You hand over your money and trust the investment company to use it for the best and return something to you. You do not have any control over the money once you have paid it to them.
This type of account is obviously more risky in the sense that the funds could easily be misappropriated. If you find the company online you might not know where in the world they’re based and what laws they’re operating under. Don’t assume that your money will be protected by any regulatory body without checking that. Actually, you must check everything doubly carefully when you’re investing in managed accounts.
The main advantage of pooled accounts is that you don’t usually need big money to get started. The managers have many investors all paying into the same pool and this makes it viable for them to accept small scale clients. This means that you can get into forex managed accounts much more easily if you choose a pooled account manager.
