Advantages of a Managed Forex Account

There are many who want to profit from the movements of the foreign exchange markets, but not all want to get involved in the nitty gritty of learning and trading a system. An alternative approach is to use an advisory service, but for some even that involves too much hands-on work, or is not an option due to time constraints. Fortunately there is another way; enter the managed forex account.

A managed forex account is exactly what its name suggests – a forex trading account which is professionally traded by fund managers. If you thought managed trading accounts were something available only to institutional investors, think again.

Managed forex accounts are becoming more and more popular among smaller private investors as the larger forex brokers have started offering them with lower opening balances (see below). With interest rates at historically low levels, traditional bank and savings accounts simply don’t provide the sort of returns that can be found with managed accounts, which can expect to return 10 - 15% or higher in an average year.

Whilst it’s true that even with some of the most seasoned professionals trading your forex account there is still a risk to your capital, it is almost certainly a smaller risk than trading yourself. This is thanks to the fact that managed forex accounts are highly regulated, those trading them simply have very little room to get things very wrong.

That’s not to say it’s all plain sailing though. Even the best account may experience periods of drawdown. When researching account options the maximum monthly drawdown is one of the key figures to look at. Others include the performance figures, taking into account both the short and long term historic performance, and the costs.

Performance is related to risk, and you will usually see a range of account options which utilise trading methods with differing degrees of risk.

Costs comprise an account management fee plus a performance related fee calculated as a percentage of profits. These vary widely, and the most expensive accounts are not necessarily those with the best performance record, so it pays to shop around. It is important to mention that the minimum opening balance for most private managed forex accounts is currently around $50k.

The Forex Angels Say: If you have money to invest but don’t want to or are unable to trade yourself, a forex managed account can provide excellent returns and diversity from equity related investments. The high opening balance may be too much for some small investors, but as managed accounts continue to become more popular, competition among brokers is increasing and this opening balance is shrinking quickly. Always shop around before opening a managed forex account.