Forex managed accounts are individual retail accounts opened and owned by individual investors but whose trading activities are managed by a money manager or a professional forex trader who has sole discretion on each and every trade made under the account. In effect, having such an account is like hiring another person to do the actual trading for you. While the account manager has the sole discretion to trade the funds in the account any way he deems fit, he however, does not have authority over the fund itself. He can only trade but cannot make withdrawals from the account.
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People who normally hire a professional trader to oversee the actual trading activities are those with large investment portfolios and may wish to put some diversity in their portfolio. These people may not have the time to manage and monitor a very volatile 24 hour market. And perhaps they may feel they lack the necessary skills and experience to handle very volatile markets such as forex.
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Every financial investor worth his salt knows that diversity is essential for an investment portfolio to achieve consistent returns. He knows it is not wise to be ‘putting all his eggs in one basket’ and knows too that foreign currencies offer a great opportunity to be able to diversify.
But being the smart lot and experienced investors that they are, they would normally shop around looking for the more successful foreign currency traders or brokers with a proven track record of success in forex trading to handle the foreign currency portion of their portfolios which more often than not are just a mere fraction of the total value of their investment portfolios.
It is perfectly normal for a financial investor whose portfolio is a mix of different investment instruments to hire a money manager to manage his forex accounts. What is baffling is would a retail forex investor who engages exclusively on foreign currency trading with no other investment instruments to boot will still go for forex managed accounts.
If their reason is their lack of knowledge and trading experience, then they should be better off staying out of the market. It doesn’t seem logical for anyone who decides to trade currencies full time to have somebody else trade the account for them. The correct approach is to learn everything about forex trading first before dipping your fingers on forex. You will not learn anything by getting your account managed by others. Besides, having your account managed by somebody more experienced than you are is not a guarantee that it will end up profitable even if that somebody has a long track record of success in forex. Remember, in foreign currency trading, a sterling performance in the past is not a guarantee of future profitability. The statistics are bound to catch up with him sooner or later and that time could very well be at the time you have your forex managed accounts handled by him.
Brokers and traders who offer their services to manage their accounts will entice people by showing them proof of their trading success in the past But again, this is not a guarantee that they will be able to deliver the same results in the future. And if he loses your money trading currencies for you, he will gain a lot from the experience while you lose your investment. And when that time comes, you will only have yourself to blame since you have given him a blanket authority to do as he wishes trading the currencies with your money. Make forex managed accounts the least of your options and go more for chomping up more knowledge and gaining more experience with foreign currency rather than hand out your money under the care of a total stranger.
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