Forex Managed Account – What is it and How does it Work?

Aug 24 • Forex Account • 2381 Views • Comments Off on Forex Managed Account – What is it and How does it Work?

A Forex Managed Account is one way of investing in the currency industry. It’s actually a very simply concept that makes it easy even for non-informed individuals to participate in the Foreign Exchange market. In fact, there are thousands of people today who have their own Managed Account and even more professional brokers that offer the service.

What is a Foreign Exchange Managed Account?

The mechanics are simple. Investors who want to participate in currency trading but don’t have the necessary know-how can simply place their money in a managed account. The account will then be handled by a professional in the Forex market, ensuring that the investment will enjoy profits. This way, the investor will be able to earn passive income without having to go through the process of learning Foreign Exchange Trading.

How much is needed to open a Managed Account?

The only drawback with Managed Accounts is that the needed capital can be big. Typically, investors will have to provide roughly $5,000 to get started. The value may change however depending on the company that will be handling the account.

How does the profit sharing system work?

Profit sharing is on a commission basis with the percentage varying from one service provider to another. Some brokers today actually provide a guarantee for their client by sharing with the profits only after reaching 100% gain. For example, if the investor puts in $5,000, profit sharing will only start if the account already holds around $10,000 in funds. From there, a specific percentage will be used.
 

 
Who is the legal owner of the funds?

The broker is only managing the funds – the account is still named after the investor. Hence, account holders are still in the position to make decisions about how the money is invested. In fact, if they so choose, they can issue instructions on where to invest and how much. It is only when instructions are not issued that the broker will invest the funds in the best way they know how.

What about theft issues?

Most people are afraid of handing over their hard-earned funds to a broker for fear that it will be stolen. The broker after all, will be handling the cash with very little supervision. However, most Forex Managed Account actually comes with an LPOA or Limited Power of Attorney. This means that the broker can only TRADE the funds – nothing else. Since the fees of the broker also depend on the profit, this gives them a better incentive to make sure that the account is earning.

All in all, a Forex Managed Account is an excellent way for investors to diversify their investments and eventually safeguard their funds. Despite how easy it is however, investors are still advised to be vigilant when committing to a Managed Account. Don’t forget to browse through different providers and choose one that provides the best perks. For more information about Forex Managed Accounts, individuals are advised while online and to learn as much as they can about the privilege.

« Forex Trading Signals: the Advantages of Alerts Forex Managed Account – Advantages of Using One »