Investing in any market or asset class is a serious business and requires serious consideration and due diligence. Here are some vitally important points you need to take into account when deciding on where to invest in any managed forex fund.
If you are about to invest a significant sum of money you need to be confident that the company is who they say they are and is in fact a real company, with real people you can talk to on the phone. If youare about to invest $50,000 for example you want to make sure that you can talk to someone about any concerns you have or may have in the future. A company should be able to provide a point of contact to answer these concerns.
The minimum starting balance for forex managed accounts varies greatly. Obviously this needs to be a consideration when choosing a managed forex account. Many high end forex accounts have a starting balance of $1 million. Find one that suits your budget and start with the minimum and get a feel for their trading and see if you are satisfied with the results.
Perhaps the overriding consideration when choosing a managed forex provider is their results. Have they been able to achieve consistent long term growth? The key point being consistency. It isn’t a lot of helpto you if your provider makes 50% one month and then loses it all the following month. You need to look for consistent results across a period of time of at least 2 years. Over a 2 years period you would expect that the trading system they used would have been exposed to a wide range of market conditions and if their results are consistent then you can be reasonably safe in assuming that their trading methodology is sound. Of course the markets being what they are future results can never be guaranteed.
<b>Costs and Commissions</b>
You also need to consider what the costs of doing business are to you the investor. How is the moneymanager being remunerated? Do they have an annual percentage fee, a fee based on trade turnover or do they take a percentage of profit per month or perhaps they even have all 3? These questions can have a profound effect on exactly how much you get to take home at the end of the month. If a trader makes a commission based on trade volume, or the number of lots he trades per month, it is possible they can simply be making money “churning” accounts whilst making little actual profit. This is also associated with “over trading”. Many forex managed funds also carry an annual percentage fee based on the account balance. You need to looks for a managed account where the money managers are rewarded for their results,so paying a percentage of new profits on a monthly basis is fair. The exact percentage will usually vary from 15 to 35% of new profits. I would be very reluctant to pay a greater percentage than this.
<b>Control of Funds</b>
One of the most important factors with Forex Managed accounts is being in control of your money at alltimes. When it comes to the actual funds for trading deal directly with a reputable broker and do notsend your funds directly to any money manager, no matter how qualified or honest they appear. Any bonafide managed account provider will provide this functionality and not ask you to send funds directly to them.
<b>Capital in Trade</b>
How much money do they have in trade? A well established and growing capital base is a good indication of just how good a money manager is. If a fund or managed account program is well capitalized it is a fairindication that astute investors with larger accounts are sufficiently satisfied of the funds long term prospects and its investment philosophy.
<b>Trading Methodology and Money Management</b>
Money managers can use any number of trading methodologies or strategies. Whatever their trading styleyou need to make sure that you are comfortable with it and it suits your risk profile. Long periods ofholding negative trades and periods of draw down can make investors very nervous, so get a good idea of their methodology before you invest. If you are not completely comfortable with their trading style do not invest with them.
Which broker you choose can be critical in determining whether or not your managed forex experience is a profitable and pleasant experience of a complete nightmare. From experience I can say that which broker you choose needs to be uppermost in your considerations. Do your homework on the broker and make surethey can deliver competitive spreads and commissions.