Forex Money Manager

If you are a forex trader, then you should definitely consider investing in a managed forex account. Today, trading in the foreign currency market isn’t what it used to be like, ie a gentleman’s club, limited to the exclusive few, where everyone at the table made money, and left happy. This article examines how the forex market has changed rapidly in recent years, and that profiting from investing in this market on an individual basis is extremely hard.

I remember a friend telling me a story about the wild west days of the forex market, back in the early and mid 90′s, before currency trading became such a fashionable and in vogue past time. In those days, it was extremely easy to make money from the forex market.  There were many tricks you could use to fool the brokers, and it was just not neccessary to invest part of your portfolio in a managed forex account, as there was plenty of money to be had from the brokers themselves.

There used to many ways of fooling the broker, and making money from trading forex, so it was just not necessary to invest in a managed forex account.  One method which was used was to place a buy trade and a sell trade either side of the current price, just before a big news announcement.  In those days, news announcements created big price movements, and it was an easy trade to make upwards of 100 pips with a big news event such as interest rates, unemployment figures etc.

And this was another aspect about the forex market ten years ago which is different than today.  There is not so much volatility in the market than there was back then.  Back in the day, everyone was making money – if your average managed forex account was making returns of 20% or 30% per month, then even the average trader could still make 10 a month on his personal forex trading account, just by using moderate levels of leverage.

So how are things so different today? Well, there are literally millions of retail players, people who have a couple of thousand dollars to play with, and who think they are the next George Soros, and believe that investing in a managed forex account is a waste of time and money.  This is coupled with the extraordinary levels of leverage that the forex brokers are offering their clients to trade with.

More and more forex brokers are opening up for business as it is a very profitable activity for them.  The average spread for a single lot traded of GBP/USD is 4 pips.  So if the broker is getting a price of 1 pip wholesale, he is making 3 pips on each trade, from each trader who opens an account – think about it – that’s $30 for each single trade! Now it becomes clear why so many brokers ares opening up for business each and every day!

To conclude, forex trading today is a very hazardous activity, and not so easy as the brokers want you to believe. Of course, it is very much in the interest of forex brokers to promote high leverage, adn to offer free training courses, in an attempt to lure people into thinking it is easy to make money in the currency market. But unfortunately this is a fallacy, and investors would be much better off investing in a managed forex account.

Thousands of investors are looking to forex to boost their investment returns..  As a result, there is a growing market for high performing forex money managers who trade through managed forex accounts.  As we will see,  having your investment looked after by a forex money manager offers a variety of possibilities and advantages for the retail investor. This editorial examines why this has been the case, and questions why so many people are now investing with a forex money manager.

So what are the attractions of hiring a forex money manager to look after your money through a managed forex account?  In the first instance, it is the belief that they will make you money.  Is this the case for the majority of money managers?

Well, yes, most forex money managers do make more money than an ordinary retail investor.  It is a fact that most retail traders have blown their accounts within 3 months.  After this period, they either go back to investing in stocks and other asset classes, or look to find a professional to manage their money in the forex market.  Finding a reliable and high performing forex trading manager can sometimes be hard, but it well worth the search.

So how can a managed forex account help you in practice? The first benefit of a managed forex account is that it gives you access to top quality forex money managers, without having to invest hundred of thousands of dollars. Most reputable hedge funds have a minimum investment of $1,000,000.

Another of the key advantages of using a forex manager and a managed forex account is that you have total control over your investment.  What does this mean exactly.  The key to this, is that you open an account with the relevant currency brokerage, and at no point do you need to send money across to the fund manager.  This means that the manager will have no access to your money.

Of course, the manager will get access to trade your funds and you can begin your online forex investing experience.  This is set out in a power of attorney which you are required to execute, and return to the broker.  What this says, in effect, is that you have granted permission to the manager to take trades on your account, and to give him full trading privileges.  It does not, however, give him any other rights over you account, such as to make transfers or withdrawals of funds.

These different levels of security are a key reason why managed forex accounts have become so popular in recent years.  In the past few years, there have been several cases of hedge funds defrauding their clients of millions of dollars.  Perhaps the biggest case reported in the press was that of Bernie Madoff.

A further comfort in terms of safety of funds for investors is that your funds will be held by a properly regulated forex broker.  All regulated brokers need to deposit a capital amount with the government regulator, and to comply with strict regulations in order to be able to conduct forex broking business.  In addition, most countries will offer some form of deposit protection to the investor, so that in the event of the broker going bankrupt, the investor’s funds will be guaranteed by the government where the broker is based.